subject: Pros And Cons Of 0 Interest Credit Cards [print this page] Pros And Cons Of 0 Interest Credit Cards Pros And Cons Of 0 Interest Credit Cards
What Are 0 Interest Credit Cards?
Given the common perception that credit cards make money purely out of the interest paid by customers who have missed paying their bills in due time, it might often be confusing to see such cards 0 interest credit cards. It means a customer doesn't have to pay any interest at all on the outstanding balance on the card for an initial period. This is equivalent to an interest free loan that one usually gets only from parents and a few friends. Hence, there is more to it than just the interest rate. The terms and conditions of 0 interest credit cards are very important.
When Should You Take Them?
Imagine a situation when a customer has 3 credit cards with varying interest rates. It is possible that due to overspending, the customer now has dues and accruing interest on the balances of each of the cards. Keeping track of the interest which is constantly mounting is one thing, deciding which one to pay off first and so on is another headache. If you can find a zero interest credit card you can transfer all your balance to one card which will help you manage the whole thing better.
Secondly, you can start worrying about paying the principal as there is no more interest accruing for a fixed period.
Cons Of Taking The 0 Interest Credit Cards
0 interest credit cards are not going to stay that way forever. Generally the time period is around one year for the more popular credit card companies. If you transfer too much balance and then are not able to pay it back within the stipulated time frame, chances are that you will have to pay much more interest, as the rates are quite high once the initial period gets over.
To get a 0 interest card, the companies have to trust you. Therefore, it is very difficult to get the card at the first place, if your history is not all that impressive. Even if you do, the later interest rates will be too high for your comfort.
If one gets complacent thinking about no interest, one might easily end up overspending and with a high balance outstanding at the end of the initial period. This is not a favorable situation at all as it becomes very hard to control the amount due from then on.
Your credit score which is so important for getting loans in the future and various other benefits will take a beating if you transfer too many balances from one card to another. The reason for this is that it will indicate lack of profitability from you for the credit card companies.
Some credit card companies charge percentage points as administrative charges, so the transaction might not be completely free of cost after all. Again, it will take a few days for the balance transfer which might prove inconvenient.
Lastly, promotional offers and other rewards and benefits associated with credit cards might not be available for those who hold 0 interest cards or who couldn't clear the balance in the stipulated time frame.
