Category: 0% APR Credit Cards
0% APR on PurchasesJan 27 2013
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Managing your 0% APR on Purchases Credit Card
With the amount of debt rising for many people, the idea of saving money on credit cards is highly appealing. Unfortunately, short of never using your credit, it’s hard to find ways to cut corners! The easiest way today is to find a credit card with an 0% APR on purchases which lasts for a set period of time and so credit card companies have been competing on the basis of extending the longest period of time possible. Generally speaking, this intro period of APR lasts between six and twelve months.
The idea of having a card that won’t charge you interest on purchases is highly appealing. What this means is that precisely what you spend on the card is what you will have to pay back for that period of time, so it’s easier to pay back what you owe. This type of card is best used for a big ticket purchase, such as new furniture or new appliances because you can pay off the large sum in a set period of time and avoid the interest on it, then put the card away.
Most standard cards have a period of six to twelve months that are interest free on purchases (usually six months). However, some specialty cards can go as high as 17 months (Tesco Clubcard, Halifax), though the interest rate will spike afterwards and you may not get much in the way of rewards, though Tesco does give extra points tied to the line of stores its hooked to. Some cards that are tied to department stores such as Sears will also give a longer period of interest free benefits in order to attract customers to shop for high ticket items.
All of this sounds good, particularly the saving money part, but this does bring one to the main point of these credit cards: the importance of understanding when the free interest rate period ends. The reason for this is because once the interest rate kicks in again, you will be stuck paying interest on any remaining balance and furthermore, some cards have retroactive interest rate, meaning that you’ll pay interest on all of the months that you were interest free as well! That can stack up to a much larger bill than one would expect, especially after X number of months with no interest.
Here are some things to keep in mind with these cards:
- Try to have the balance paid off well in advance of the deadline. This is because the post date of your last payment may come after the deadline, in which case you’ll be charged interest. Aim to have it paid off at least a month in advance of the deadline
- If you can’t do it, then plan to shift the remainder of the debt (as little as possible) to another credit card with a lower interest rate. Shifting it to a 0% balance transfer credit card works, but only if you pay off the old debt before using the card again because you have no way of knowing which debt your payments are going to, meaning that you could end up paying money into the old debt for a lot longer than you thought. And make sure you choose a card that has an intro period of least six months so that shifting the debt over won’t cause a black mark in your credit history.
- If you intend to use the card beyond the intro period, make sure it has other things you need like the right rewards and a decent APR and fees. Cards like the Discover IT have both a good period of 0% interest and great rewards.
- These are still credit cards, so when used properly, they will boost your credit rating; when used wrong, they will screw up your credit record. Make sure you use this, and any credit card, properly!
Credit cards that offer 0% APR on purchases are really beneficial, particularly for big ticket items or one shot expenses like vacations. When they are properly planned for, they’re like getting an interest free loan for something you’d only spend money on once. Just be sure to pay off your debt as soon as possible and you can use these cards to help save you a great deal of money and get you the things you need.
Take a look at 0% APR on purchases credit cards like the Discover IT and see how they can help your finances. You can apply for your favorite card here. Enjoy!
0% APR Credit CardsJan 27 2013
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The Strategies of 0% APR Credit Cards
One of the factors which goes into deciding which credit card to get is the APR, or annual percentage rate-i.e., the interest rate of the card. The interest rate is how much the bank or credit company ends up charging you for carrying a balance and it generally falls anywhere between 6.99% and 29.99% (or higher, depending on the card). Most people end up carrying a balance at some point and that means that they pay extra money on top of what they owe for using the card. The more you owe, the more money you have to pay in interest. This means that most people opt to get a card with the lowest possible interest rate while still getting the perks they want.
It didn’t used to be an easy juggling act. Cards with great rewards usually had higher interest rates-that’s how the banks and creditors made the money they needed to afford said rewards. Cards with no rewards had lower interest rates because they didn’t have much else going on for them anyway. But a game changer came along in the form of introductory APR. The introductory APR brought in extremely low interest rates (right down to 0% in most cases) for a limited amount of time and came tagged to rewards credit cards. Suddenly the competition was no longer just about who had the lowest rate, it was also about who had 0% for the longest period of time.
Ever since then, more and more cards are offering intro rates on purchases and/or balance transfers (almost always balance transfers, often purchases), but don’t start dancing gleefully about the house just yet. There’s a catch to these things which is in order to use them properly, you have to ensure that you can pay off your balance before the expiration of the intro period comes up, otherwise you’ll suddenly owe a lot more money than you originally thought. It’s here where these creditors are hoping to zing you; by luring you into using your card more while the interest is free (plus rake up the rewards), they are hoping you’ll get too deep in debt to get out and by then, the company can hit you with an APR on several thousand dollars worth of balance. That’s a lot more money you’ll owe them!
Obviously this is not a good thing, so you’re going to have to use some strategy in order to really make use out of cards which offer you both great rewards and a lack of interest rate.
- First, make sure that if you’re doing a balance transfer from another card that you will be able to pay it off in full before the intro period for the balance transfer runs out. Generally speaking, the intro period on balance transfers is longer than the one on purchases, but opts for the shortest period of time anyway. And make sure to pay off the balance of your purchases in full too.
- Don’t get taken in by the awesome rewards. Sure cards like the Discover IT gives you great cash back rewards, but it won’t do you a lick of good if you owe a huge pile of money before you can actually redeem your rewards!
- Don’t sacrifice what you will actually need from your card for a longer intro APR period. Sure 18 months or 24 months is nice, but do you really need concierge services or a card that just gives you intro APR and nothing else? Balance out the rewards and services you’ll realistically use with the intro period you want and don’t forget the impact of your credit history.
0% APR is definitely a good thing and the competition means that companies are greatly extending the time you have, from six months to twelve months to eighteen and even a few cards that go as high as two years! However, don’t let yourself be blown away by the freedom from interest rates and let yourself get too mired in debt because when the interest comes back, it will hit you like a hammer. Be smart and these cards can save you quite a bit of money, plus-at least in case of cards like the Discover IT-reward you for doing it. Enjoy and be smart with your money.