Beware Of Zero Percent Interest Credit Card Offers
Not Really Interested in Helping You
Despite the headline I quoted, credit card companies are not interested in helping you crush your debt. If they were serious about actually helping you, these zero percent offers would come with documentation or tools to help you figure out how to make consistent payments for a selected amount of time to eliminate the balance with zero or minimal interest paid. But no such owner’s manual or toolset exists. You are left on your own to figure that out. Additionally, the credit card companies offer no help in fixing the underlying problem that got you into debt in the first place.
Fees To Be Aware Of
When transferring balances to a credit card with a promotional interest rate offer, there are two things you need to be aware of:
- Balance Transfer Fees: The standard balance transfer fee is three percent of the balance transferred, $50 minimum. This may not sound like a lot, but if you transfer $10,000 to the new card, your balance transfer fees will equal $300. When you see an offer of zero percent interest, keep in mind that doesn’t mean it won’t cost you anything.
- Interest: Even though the promotional offer is zero percent interest, we still need to talk about interest. Throughout the promotional period, interest is calculated and accumulated, it is simply not applied to your balance. If you reach the end of the promotional period and your balance hasn’t reached zero, all of that interest is applied. For significant balance transfers, this could be thousands of dollars.
Is Zero Percent Credit Card Offers Worth It?
Whether to use a zero percent credit card offer or not really depends on your unique situation. I actually took advantage of one of these offers a few years ago after determining it was worth it. The analysis can be found here as a guideline as to how to determine if it’s in your best interest to take advantage of such an offer.
Credit cards with a promotional zero percent interest rate aren’t new, but they seem to become more common again. Pay no attention to the headlines meant to draw your attention, and do the mathematical analysis and formulate a plan to pay off your debt with as little fees and interest as possible.
How about you, Clever Friends, have you seen one of these sensational headlines? Have you taken advantage of a zero percent credit card offer?
Brock is a software engineer by day and personal finance blogger at night. He is a fitness junkie and enjoys grilling and smoking meat. Married with two children, Brock strives to improve his skills as a husband and father, and is always on the lookout to stretch his family’s budget as far as he can.
Always read the fine print, that’s my motto. I started becoming more careful with any offer I receive and it helped me save quite some money.
I have used on occasion the zero percent offers. We had finished a $30,000 kitchen rip out total remodel and while we had more than enough $ in our maintenance savings acct. to more than pay I took advantage of the offer. I would never do it if the $ was not there to pay it off. With careful calculations prior to acceptance, we saved the $30,000 that would have gone out all at once at the end of the project, and put that $ in a good vehicle that made us a lot more $ than the cost of the transfer. We made over $2500 by using the transfer offer. Doesn’t always work but when used strategically not a bad deal. Since we more than had the $ available it was not a risk but it can be risky if you don’t know if the investment will work.