The Good and Bad of Zero-Interest Credit Cards

The offer of a zero-interest credit card can look enticing when it arrives in the mail. Who doesn’t want to avoid paying interest on credit card charges?

As with most things in life, there are pros and cons to using 0-percent credit cards. Here are some facts to consider before you respond to that offer:

Balance transfers: The 0-percent interest offer is a smart way to transfer balances from one card to another. Moving a high balance from a high-interest card to a zero-interest one can save you thousands of dollars.

Check the introductory period: Zero percent interest is only available for a certain amount of time, usually from six to 18 months. If you have a balance beyond that introductory period, you’ll be paying interest again.

Avoid fees: Some 0-percent credit cards will wave transfer fees of 3-5 percent for new cardholders, and waiving the first year’s annual fee is common. If the credit card provider won’t offer these benefits, ask for them. If you do pay the fee, it will be rolled into your credit card balance.

Apply quickly: Balance transfers — which are the most common reasons for accepting a 0-percent credit card — are only available for a limited time when you get the offer. If you’re sure it’s going to save you money, then make the switch before the deadline ends — usually 30 days but sometimes as long as four months.

Pay on time: A late payment of only one day can void the 0-percent APR, causing the interest rate to climb high and fast.

Pay in full: If you are going to use a 0-percent credit card to your advantage, pay it off entirely before the offer of free credit ends. Any amount that isn’t paid in full before the 0-percent interest deal expires will be charged the full interest rate back to the date of purchase.

Don’t transfer again and again: Promotional balance offers may arrive in your mailbox often. Only use one to pay off your credit card debt at zero interest, and don’t apply for another card to transfer the balance to if you can’t pay off the second card before the promotional term expires. It can cost you more money and can hurt your credit score.

Now that you know what to look for when your mail carrier arrives with an offer from a credit card company, you may be tempted to go on a spending spree. Don’t. If so, the best solution may be to toss the offer in the trash.