Credit cards with no interest for a year sound like a great deal!
Credit card companies may offer no interest for a certain time frame, and in some cases for the life of the balance transfer.
Why would they do this when they are in the business of making money?
No interest credit card offers are a great way to lure new business. Although a no interest credit card offer seems like a good idea, there are some things you need to know. Here are a few advantages and disadvantages of credit cards with no interest.
Some of the Advantages of No Interest Credit Card Offers Are:
Borrow Money for Free
Instead of having to come up a bunch of cash up front, you can make a purchase then make payments over time without having to pay interest. Using a no interest credit card is a great option when making a major purchase like an appliance, furniture, laptop, etc. Essentially, it will be a “same as cash” transaction if you can pay off the credit card balance before the no interest offer expires.
Pay Down Balances Faster
If you are responsible managing money and pay more than the minimum payment, this is a good option. Since you are not paying interest, your payments are all applied to the balance and will pay down or pay off balance faster.
Some Disadvantages of No Interest Credit Card Offers Are:
It’s a Temporary Thing
In most cases, no interest credit card offers are temporary and last six months to one or two years. Some credit card companies may offer no interest on balance transfers for the life of the balance, however new purchases are charged interest.
Possible Interest Increase
After the no interest credit card offer expires, the actual credit card interest rate, known as the Annual Percentage Rate (APR), may be applied to the remaining balance due. Also, if a payment is paid late, you may forfeit the no interest offer, and a penalty rate may be applied.
Credit card companies still make money on no interest offers through credit card fees. Some fees to look out for and avoid are monthly maintenance fees, balance transfer fees, annual fees, past due payment fees, etc.
Before accepting no interest credit card offers read the SCHUMER Box, which is the credit terms of the credit card. Make sure you understand the time frame of the no interest offer, the actual Annual Percentage Rate (APR) when the no interest offer expires, the penalty rates, and the associated fees.
Reading and understand the fine print up front will save you money and help you avoid financial drama down the road.
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Consumer Education Services, Inc. (CESI) is a non-profit service provider of comprehensive personal financial education and solutions for all life stages and for all of life’s milestones. Our goal is enhanced economic security for everyone we serve.
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