No Interest Credit Cards - To Good To Be True?

No interest credit cards. How cool would that be?! It sounds too good to be true because in a way, it is. While you may receive one of these credit card offers, the 0% interest won’t last forever. And when it ends, you may end up in a worse position than you were before.

If your credit score is relatively good, you may receive unsolicited offers for no interest credit cards by mail or email. But be aware of the fine print. Usually the 0% interest lasts anywhere from three to twelve months. After that, the rates can jump to the mid teens or even the low twenties. It’s not unusual to see rates go up as high as 24% after the introductory period.

0% Interest

However, if the interest rate will be the same or lower than you’re paying now after the promotional 0% ends, go for it. You really have nothing to lose and you’ll actually be paying off principal only during the 0% time period. By paying as much as you can during this time (not just the minimum), you can knock down your balance significantly.

Another situation that lends itself well to this solution is when your budget permits you to pay off the balance before the 0% period ends. To determine whether you can do this, simply divide your balance by the number of months the new card will be at 0% interest. If you can afford that monthly payment for that amount of time, you’ll save a lot in interest and get out of debt.

If you’re not able to pay off the balance in that time frame and the interest rate will be higher than what you’re currently paying, this may not be the best option for you.

A better solution may be to search for cards that offer a lower fixed interest rate on balance transfers until the balance is paid in full. These are a little more difficult to find but they’re out there. You can call credit card companies you already deal with and ask them if this option is available for balance transfers. Ask for what you want and negotiate from there. And again, the better your credit score, the more options you’ll have.

One thing to keep in mind no matter which direction you choose - always pay on time. One late payment and the ride ends. You'll go straight to the after promo interest rate. Depending on how much that is, it can really throw off your plan.

No interest credit cards may or may not be a good fit for you. You really have to carefully weigh the pros and cons and decide if one of these cards will save you more money in the long run. Here’s a great credit card payment calculator to help you with that decision.

Keep in mind, that anytime you apply for a new credit card, it temporarily lowers your credit score. Also before applying, look for fees and other hidden charges which may be concealed in the fine print. If you decide this would be a good thing, be sure to do the research upfront to ensure you choose the best card for you.

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