0 Interest Credit Cards 5 Tips Before Applying for No Interest

Things to Know About 0 Interest Credit Cards

If you have credit card debt or you’re looking to finance a large purchase, no interest credit cards are an option that could save you money and even help you improve your credit score. But this type of credit cards isn’t for everybody, and it’s important to understand how they work before you apply for one. Here are five things you need to know about 0 interest credit cards so you can make an informed decision.

0 Interest Credit Cards 5 Tips and Things to Know Before Applying for No Interest Credit

5 Tips Before Applying for 0 Interest Credit Cards

1. Zero Interest Cards Are Only Zero Interest for a Limited Time

Credit card companies obviously can’t give out credit cards that stay at zero interest indefinitely. They’d lose a substantial amount of money on credit card interest charges. When you see credit offers for no interest credit cards, remember that it’s only for the introductory period. The card issuer will specify the length of this introductory period in the terms and conditions for the card and in advertisements for the card.

The most common introductory zero interest period is 12 months. 0 interest credit cards may have shorter or longer introductory periods. If you don’t pay off the balance in full by the end of that 0 introductory period, the card issuer will charge you interest. Make sure that you can pay off any balance in full to avoid this, whether you’re transferring balances to that credit card or you’re using the card to finance a large purchase. The Citi® Diamond Preferred® Card is one of the best zero interest cards. The Citi Diamond card offers 0 interest for the first 21 months.

2. You’ll Probably Need a High Credit Score to Qualify for 0 Interest Credit Cards

The best 0 interest credit card offers are only available to consumers with high credit scores. Credit scores are between 300 and 850, and each credit card company has its standards when it comes to scores. Most companies consider a credit score between 700 and 749 to be good and a score of 750 or higher to be excellent. Some card companies consider anything above a 720 to be excellent.

Multiple banks and credit card companies offer free credit score monitoring to their customers. Free credit score monitoring allows you to check your credit score with at least one of the three credit reporting bureaus. Federal law entitles you to one free credit report per year from each of those bureaus. These credit bureaus are Equifax, Experian, and TransUnion. If you’re unsure of your score, it’s a good idea to check it before applying for any no interest credit cards.

With a score of 700 or above, you stand a better chance of approval for 0 interest credit cards. Anything lower will be hit or miss depending on that credit card issuer’s standards. Keep in mind that the same card can have different interest rates.

3. There are Balance Transfer Fees on Most No Interest Credit Cards

The best no interest credit cards now often make the deal even better by offering balance transfers without a fee. These no interest, no-fee balance transfer cards are the exception, not the rule. A balance transfer fee is a normal charge with most 0 interest credit cards. The standard fee is 3 to 5 percent of the balance you transfer.

Calculate how much you’d pay in interest charges compared to how much a balance transfer would cost to decide if transferring a credit balance is a good idea. In most cases, if you have a credit card balance that will take more than three to four months to pay off, you’ll save money with a balance transfer.

Balance Transfer Card With Lower Fees and 0 Interest Intro – Chase Slate® Visa Credit Card

4. Watch Out for Penalties on 0 Interest Credit Cards

You could still end up paying interest. It’s never good to miss your credit payment, pay less than the minimum amount or go over your credit limit. Missing credit card payments can all affect your credit score and lead to credit card fees. They’re even more of an issue with no interest credit cards. One mistake could be the end of that 0-percent interest deal.

For especially extreme issues, such as having a payment that’s over 60 days late, your card issuer could raise your annual percentage yield (APR) to a penalty rate. These can be as high as 30 percent.

If you manage your spending and credit lines on credit and bill payments properly, you shouldn’t run into any problems. Just make sure you stay on top of everything, so you don’t lose that credit card low-interest rate. Set calendar alerts or automate your credit payments if necessary.

5. Zero Interest Cards Can Both Lower and Raise Your Credit Score

Each of the three credit bureaus issues you a credit score which can change over time. All three use the same general credit approval criteria for your credit score. Payment history and credit utilization are the most significant, but hard credit inquiries, age of accounts and credit mix also contribute.

There are a few ways that 0 interest credit cards can affect your credit score. When you initially apply for a credit card, the card issuer will run a hard credit inquiry. This hard pull credit inquiry brings down your credit score a small amount. As long as you don’t apply for many different credit cards or loans in a short period, it will only be a minor drop in your score.

If the card issuer approves you, then your available credit will increase according to the credit limit on your card. Your credit utilization will then decrease, which can improve your credit score.

For example, let’s say that you had one credit card with a $10,000 credit limit and a balance of $5,000. Your credit utilization was 50 percent, well above the recommended maximum of 30 percent. If a card issuer approves you for one of its no interest credit cards and issues you a $10,000 credit limit, your total available credit is then $20,000. This credit line increase then drops your credit utilization to 25 percent. Because of how important credit utilization is, this can result in a solid boost to your credit score.

Learning to Spend Wisely With No Interest Credit Cards

Something to remember when it comes to balance transfers with no interest credit cards is that you’re treating the symptom, not the cure. What this means is that you may save yourself some money that you would have spent on interest, but the real issue is your spending habits. Credit card debt is a sign that you’ve been spending beyond your means. Without changing your spending habits, you’ll end up running into the same problems.

Run the numbers to see how much a balance transfer to a 0 interest credit card could save you. Make sure that it’s realistic to pay off the balance within that introductory period. After making the balance transfer avoid using the credit card for any new purchases. Wait until you’ve paid off the transfer in full. Going forward, keep track of how much you earn every month and don’t rack up a credit card bill that you can’t pay.
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Monica Kowollik

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