In a financial crisis similar to a challenge coronavirus, some consumers may turn to credit cards that offer 0% introductory per annum to help them go the other way.
Reliable choices are primarily available to people with good credit (FICO scores 690 and above). An online card at 0% per annum allows you to charge expenses, such as groceries and other essentials, on your card and then repay them in about a month without interest. In the event of a sudden job loss this can be a tool that allows you to continue to feed the family until you make a profit again.
But the introduction of proposals at 0% may be more difficult than it seems at first glance. In general, the debt must be paid by a certain date, and you still have to make minimum payments to keep the terms of the offer. Failure to do so could result in much higher interest rates.
Parade Nerd: In a crisis, going to an emergency savings fund instead of a credit card may be the best option because it’s your own money and you don’t have to worry about paying interest and fees. But if you don’t have such a fund, introducing a 0% annual credit card can be helpful – as long as you don’t repay your debt before the offer expires.
0% of APR introductory sentences do not last forever
If credit cards offer 0% annual introduction periods, they typically last 12 to 18 months from the time the card is first received.
This means that once the period is over, the annual interest rate goes back to its usual constant rate. So you want to be sure to repay the balance before the offer ends, or interest can start accruing very quickly.
Minimum payments must be made to support the offer
During the introduction period of 0% per annum, you must make the minimum payment each month on time. Otherwise, you may invoke a higher annual on your account and completely lose the 0% per annum offer.
The introduction of 0% per annum may not apply to all transactions
Some cards offer the introduction of 0% per annum only when shopping; others can promote on balance transfers only. While both types of offers can be helpful, you want to be sure you know which one you have so you can take advantage of it.
If the introductory offer of 0% per annum goes to shopping, then this card is well suited to help you purchase essentials such as food during a crisis. If the offer is for a balance transfer, then the card is best aimed at helping you repay your existing debt.
And while you’ll definitely be able to find cards that offer an introduction of 0% per annum on both purchases and balance transfers, you’ll still have to track your transactions and payments, and when stocks run out.
Parade Nerd: If you take advantage of a balance transfer offer, you are likely to charge a balance transfer fee, usually either a flat fee or a percentage of the balance you transfer. Before you transfer your cash balance to the 0% annual card per annum, make sure your savings on low interest payments more than offset that fee.
“Deferred interest” or “special financing” offer not the same 0% per annum
Some stores have cards with the name “a” deferred interest purchase offer, which means simply: interest is deferred or canceled, but not refused, as it would be with a valid introductory offer of 0% per annum. During the advertising period with a deferred interest rate, interest is still calculated. If you repay the balance in full before the offer expires, the hook is turned off. But if you still have a balance on the card – even a small one – when the stock runs out, they have to pay all the interest accrued in the background for that period, retroactive to the date of purchase.