A True Zero Percent Credit Card

What makes a true 0 percent credit card? It's obvious that no company is going to give you free money month after month, at some point they have to get paid. How ever is it possible that you can enjoy a certain time period where you wouldn't have to pay? This article explores the fine points of a 0 APR credit card, how long you get the 0% rate for, and things to evaluate before switching from your current card. After reading this article you should know if switching to a zero percent credit card is the right change for you.

What does it mean to be 0%

It is true that when you first get the credit card your rate will start of at zero percent. You'll have no interest billed on your purchases or balances that your transfer to that card. It's a great feeling and saves you big bucks if you've been paying 18% or more on your credit cards. How ever while 0% credit cards aren't a fairy tale they do have some similarities.

The 0% credit card you apply for will be this way for a set number of months. The Zero percent interest rate is known as an introductory interest rate. One which stays in effect for 3, 6, sometimes even 12 months. How ever when the rate changes it could go back to a similar rate that you were paying before, so it's important to know how long the zero percent intro rate will last.

Things to evaluate before switching credit cards

Now that you know you won't have a 0 percent credit card forever it's time to make some evaluations to determine if it's worth making the switch or not. You'll want to check your current interest rate versus what the fixed interest rate would be on your new card, as well as check for any annual fees or limitations the new card might have that you're accustomed to using.

The biggest part of this evaluation should be looking at how much interest you currently pay, how much of your balance you can pay off during the 0 percent period on the new credit card, and how much interest you anticipate paying after the introductory rate is over on the 0 percent credit card.

Here's an example: Let's say you currently have a card at 16.9% you're paying about $80 in interest each month. When you transfer your balances over to the new card you get a 0% introductory offer for the first 6 months. You figure you'll be able to pay down about $2000 of your balance during this period, how ever the fixed rate after 6 months on the new card is 19.5%. Is it worth it?

The answer in this example is yes, as long as you don't rack your balance back up again. You'll be able to save $80 a month in interest fees for the first 6 months, and then have a lower balance when the higher fixed rate kicks in. The difference you'll save during the 0 percent time on the new credit card is worth it.

You should do an evaluation of your own card before you run out and switch to another card. It's possible that you might consider a low fixed rate card rather then a 0 APR credit card (the lowest interest credit cards I've seen are in the 7%-8% range). You won't get the 0% time but you'll have a lower interest rate while you pay off your entire balance. A 0 percent credit card isn't for every body.