Those who are seeking to apply for credit cards are often lured by credit card companies with deals like zero percent credit cards. With promises of being the best thing that they can offer when allowing for buying power at any time, most credit card companies fail to actually be thorough in describing to their potential clients how a zero percent credit card actually goes.
Because nothing in this world is free, chances are, there might be a few things that you can miss out due to the excitement of getting a credit card with zero percent interest. It sounds too good to be true, and if you would not want to be misled, you have to look into how these credit cards with zero interest really work to understand why they offer such privileges.
What Are Zero Percent Credit Cards?
Financial institutions love their customers, and one of their most profitable ventures would be shelling out credit cards. Because these credit cards help these banks earn mainly on interest, it might sound ironic for them to allow for zero interest when it comes to offering such.
One of the things that you’d have to look into when you are offered a zero percent credit card is to check the number of days where the zero interest offer on the credit card would be valid. These are often called introductory rates, and would only last for a considerable amount of time. Because most creditors only lend out an allowable number of days for such, you might work into overusing the card without any idea that such privilege has already expired. Most banks, however, would actually allow such offers to go on for about six months.
The next thing you would need to look into is how a zero percent credit card would allow for payments. Most creditors do allow zero percent interest rates upon the point of sale, which is usually a good deal for buying expensive items. You have to check though if the credit card company would have a minimum purchase criteria for spending with zero interest credit cards. Because most people would end up taking advantage of such features, most creditors would find that it could cause for credit card users to lag on their payments because initially, they really did not have any means to pay for such purchases other than the credit that was offered. Make sure though, that you have sufficient ways of making payment when you make purchases, so as not to earn you any interest fees in the future.
However, there are some customers who see a loophole in such. Because it is zero interest, most people would likely go ahead and transfer balances of other credit cards that they have to the one that has zero interest rates. They get to pay without any additional charges, except maybe money transfer fees, and work out their finances easily. For you to be able to work out such, ask you creditor if they would allow this type of payment scheme. Because most credit card companies only earn on zero interest credit cards due to the fact that some people pay late fees and annual fees as well, they might not provide information on such methods firsthand.
Regarding annual fees on zero interest credit cards, you are still bound to pay for such. Some people do cancel out the card after the no interest period expires. But if you have accumulated rewards and other benefits, it doesn’t make for doing so. You also get to raise your credit limit after such time, which makes zero percent credit cards advantageous to you after sticking with a certain credit card company for a time.