How many times have you opened up your mailbox and found a credit card offering you no interest on purchases? It probably happens all the time. No interest credit cards can be extremely tempting if you are currently struggling with high credit card debt. They can also be useful if you are going to need to make a big purchase and want the flexibility of paying it off over time without the worry of interest.
Before you jump on that next offer that pops up in your mail, though, make sure you understand all the facts about no interest credit cards. Some of these could end up saving you thousands of dollars.
Understand that Approval Is Not Guaranteed
Try not to get too excited just because you received a credit card offer in the mail. While the issuer has identified you as a borrower they want carrying their card, things can change. If your credit score has dropped between the time the offer was mailed and the time you send in your application, then they are within their rights to decline the application.
Don't Be Caught Off Guard by Deferred Interest
The holiday shopping period is quickly approaching, and that means retailers will the pitching their store credit cards and the promotional no interest period that comes with them. The idea to not pay interest for that new computer for most of 2017 is tempting, but you need to be careful. Pay close attention to the terms on the card because many will include language about deferred interest.
If your card has deferred interest, then it's critical that your balance is paid by the end of the promotional period. If it's not paid, then the issuer might require you to pay interest all the way back to the purchase date.
Don't Get Over-ambitious with the Sign-up Bonus
Sign-up bonuses are a huge selling point for a lot of credit cards. Before you jump on a credit card offer with a high bonus, make sure you are not getting in over your head. Many times the bonus will come with a large initial spend requirement. If this amount is higher than you are comfortable with, you could have trouble paying it off. The last thing you want to do is accumulate an interest accruing balance. That will just negate the value of the rewards you earn.
Missed Payment Penalties Can Be Severe
One of the worst things that you can do is fail to pay your credit card on time. Not only are you going to have a late fee tacked onto your balance, but it could affect your credit score as well.
Late payments can also have a significant effect on any deferred interest agreements that you have set up. Late payments can automatically void the arrangement, and you might owe interest back to the initial purchase.
What Is Your Post-introductory Period APR?
Credit card issuers will always do a great job highlighting that a card has an introductory 0% APR period, but they will rarely make it obvious what the APR will become when the introductory period has ended. Make sure you look at the terms before applying for the card so that you fully understand the rates and fees involved. If the new card will have a higher APR than your current card, it doesn't make must sense to keep it in your wallet after the introductory period is complete.
Make Sure You Have a Plan for Balance Transfers
One of the most popular uses for a no interest credit card is so you can transfer an existing balance and work towards paying it off without accruing interest. It's important that you construct a plan and put it in place before the balance transfer happens. Understand exactly how much you need to pay each month in order to wipe out the debt before the promotional period expires.