How to maximize benefits of a 0% APR credit card
Sometimes, it seems as if credit card deals are a dime a dozen: You get mail and Emails telling you that you are preapproved for these offers all the time, right? Well, don’t ignore them. Sometimes, they can be a huge benefit, and there are absolutely ways to maximize these offers.
Some credit cards guarantee a 0% APR. This means that you will pay no interest for a pre-determined period of time. This, in turn, can be hugely beneficial, and there are many ways to maximize these – as long as you plan appropriately.
First, keep in mind that 0% APR may apply to purchases, or to balance transfers, which are balances that you bring over from another card. Make sure you fully understand how your credit card will work before making any purchases.
The best way to maximize the benefit of a 0% APR card is to make a larger purchase and then pay it off in installments. This, in essence, allows you to create your own installment plan. You can then pay off the debt that you incur in installments. This may allow you to make a major purchase interest-free.
However, if you pursue this strategy, make sure you are disciplined and organized in your payments. A credit card company can cancel the offer if you are late, even by just a single day. Furthermore, make sure you pay off the balance by the end of the pre-determined period. If you don’t, you may have to pay the normal interest rate on the entire balance of your purchase, and this can get very expensive, very quickly. You also want to make sure that you are secure in your finances and that you don’t use too much of your available credit. Doing so may drive up your credit utilization rate, and this can hurt your credit score, making it harder for you to get these offers in the future.
If the APR offer is on balance transfers, there could be good news. If you are someone who pays off your credit card every month, it probably won’t affect you much. However, if you have existing credit card debt or other debt that you may be able to consolidate onto this credit card, you should absolutely examine this offer. Making a balance transfer to a card with 0% APR can help you save hundreds or thousands of dollars on interest payments.
However, the same rules as above still apply. You will need to make the payments by the end of the promotional period in order to avoid any interest rates, and you will need to be even more religious about making on-time payments than you normally are. You may want to invest in some financial software or create an excel spreadsheet that can help you keep track of your overall debt and when payments are due.
In the end, these offers are only worth taking advantage of if you have the discipline to manage them appropriately and make sure that you continue to make payments on time. They also require that you read the fine print, including when an offer ends, what happens if you are late in making payments, and under what circumstances you could lose the 0% APR.