Zero interest credit cards are powerful tools, but you shouldn’t use them as a crutch. That means you should use them to help you pay off debt, rather than as an excuse to keep accumulating more debt or a way to delay paying down the balances you already have.
If your main goal is reducing credit card debt, balance transfer offers can be your best friends. Find a card with the longest possible 0% APR period, and the lowest possible transfer fees (3% is a common transfer fee). If you think you’ll be able to pay off the entire balance while the interest rate is low, figure out exactly how much you’ll have to pay per month to reach that goal.
To use an easy example, if you’re transferring a balance of $15,000 and you find a credit card offer with a 15-month interest-free period, you know you have to pay $1,000 per month to have the balance paid off by the time the interest rate shoots up to the double digits.
But be realistic about this. If you really can’t afford to pay off the transferred balance in the available time without letting your balances creep up on other cards, admit that from the start. Figure out what you can really pay per month and plan accordingly. If you can only afford to pay $750 per month on that $15,000 balance, you’ll still owe $3,750 at the end of the 15-month no-interest period — still a big improvement over the $15,000 balance you’re starting with.
Also make sure you’re prepared in case you still have a balance when the interest rate goes up. You can start by monitoring your statements closely, which is crucial for many reasons, not just to keep track of interest rates. For one thing, that’s how you’ll catch fraudulent purchases on your account. But beyond that, setting up a reminder in an online calendar is another good way to keep on top of financial milestones that are pretty far away, like the end of a temporarily low interest rate on one of your credit cards.
Set the reminders to ping you halfway through the introductory rate period, so you can evaluate your progress and make adjustments. Perhaps your income has gone up since you first applied for the card, and you can afford to increase your monthly payments. Perhaps you’re straining to pay so much, and neglecting other debt payment priorities or savings goals. Either way, the halfway point is a good time to readjust. Then set another calendar reminder to alert you a month before the interest rate is due to rise, so you won’t have a nasty surprise when you open your statement and realize a chunk of your last payment went toward the new, higher interest rate, not toward your principle.
Some people with good credit look for new 0% credit card offers when their current low rates are about to expire. Just keep in mind that it’s not good for your credit score to apply for too many new cards, and the balance transfer fees will eat up some of the savings you’re getting from the lower interest rates.
So make a plan to pay your debt off, find the best possible balance transfer offer, and figure out how to trim other expenses to increase your payments. Your debt-free future self will thank you.
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