If credit card interest payments were merely a matter of mathematics, 0% interest would be a no-brainer. Given a choice between paying interest or not paying interest, of course nobody would choose to pay, would they? Common sense says paying ZERO dollars in interest is the best possible way to borrow money. So, why should you think twice before agreeing to a 0% interest credit card or balance transfer promotion? Two words: Fine. Print.
All that glitters is not gold.
There’s a marketing proverb that says, “Sell the sizzle, not the steak.” And make no mistake, 0% offers are most definitely sizzle! If utilized properly, these promotions can save you money. But if you don’t pay close attention to the details found in the fine print of cardholder agreements, those offers could wind up costing you more than you wanted to pay (which is sadly, often the case). With so many credit card companies offering 0% interest cards and balance transfer promotions, it’s difficult to compile an exhaustive list of potential pitfalls. So, rather than trying to cover all the caveats, let’s focus on the features that, if ignored – could quickly take the shine off any promotional offer.
- Transfer fees.
In many instances, transferring a balance from one credit card to another involves a fee (usually ranging from 3-5% of the balance). Depending on the amount you transfer, this additional fee could significantly lessen your overall savings. Not every balance transfer promotion includes a fee, so do your research before you accept an offer. It’s never fun to discover unexpected fees after you’ve already committed to an offer’s terms and conditions.
- Steep interest charges after the introductory period ends.
0% interest is a good thing. But unfortunately, the adage is true. All good things must come to an end. Most of these promotions include a limited-time introductory period of 0%, after which, the remaining balance will begin accruing interest—often at a high rate. If you plan to pay off your entire balance during the introductory period, the transfer can be a huge benefit. However, if you’re planning to carry the balance forward (or if you forget to pay your balance off before the 0% ends), it’s best to know when the interest charges will start and how much they will be. Once again, reading that cardholder agreement and fine print is key. After the 0% introductory period ends, some of these credit cards can have an APR of nearly 30% – and if your balance isn’t paid off by this time, you could be charged that insanely high interest rate for not only what you have left to pay off, but what you transferred over in full in the first place. We can’t say it enough: before you open a 0% interest credit card, be sure you understand the terms and conditions in full.
- Higher interest rates on new purchases.
Be careful. The 0% interest rate on your transferred balance also rarely applies to new purchases. The major credit card companies are in business to make money, and interest charges are their primary source of revenue. By charging a higher interest rate on new purchases, credit card companies can offset the interest they’re missing over the course of promotional introductory period. So, before you start racking up charges above and beyond the balance you transfer, take time to know exactly how much interest you’ll be paying.
First Financial’s Visa Credit Cards offer benefits that include higher credit lines, lower APRs, no annual fees, a 10-day grace period, rewards (cash back or on travel & retailer gift cards), an EMV security chip, and more!*
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*APR varies up to 18% when you open your account based on your credit worthiness. These APRs are for purchases and will vary with the market based on the Prime Rate. Subject to credit approval. Rates quoted assume excellent borrower credit history. Your actual APR may vary based on your state of residence, approved loan amount, applicable discounts and your credit history. No Annual Fees. Other fees that apply: Balance Transfer and Cash Advance Fees of 3% or $10, whichever is greater; Late Payment Fee of $29, $10 Card Replacement Fee, and Returned Payment Fee of $29. A First Financial membership is required to obtain a Visa Credit Card and is available to anyone who lives, works, worships, volunteers, or attends school in Monmouth or Ocean Counties. See firstffcu.com for current rates. No late fee will be charged if payment is received within 10 days from the payment due date.