Things You Must Know About Interest-free Credit Cards

Signing up for an interest free credit card always seems an attractive option when you are looking for a credit card with lower interest rate, planning to make some big purchases or just to start building your credit score. 0% interest rate credit cards can help you get your debt managed smartly and under control either by transferring your balance to another account or by making big purchases into multiple payments without paying any interest amount. 

In this article, we highlight the most important things you must know about interest free credit cards so you can make wise and informed decisions.

They’re good for lowering credit utilization

Credit utilization versus how much balance you have available is decreased with each new line of credit you apply for. Keeping your credit utilization under 30% is highly recommended by experts. The more credit limit you have on a card, the lower utilization will be. An Interest free credit card is always good for lowering your credit utilization to help you maintain favorable credit limits. If you use a credit card and make minimum monthly payments, then your credit utilization will become higher and it can harm your credit score.

These Cards are Temporary

0% interest credit cards usually come with an introductory offer that you can enjoy for a particular period of time. The duration of offer could range between 12 to 24 months. Once the offer expires, they will start charging the standard interest rate. That is the reason, you should check for the terms and conditions before applying for a zero interest credit card to see how long you can enjoy the zero interest rate. If you have purchased some big ticket things when you apply for a card, ,make sure to pay the balance in full before the 0% interest offer expires. Otherwise, you will be on the hook for interest payment on the remaining balance that can take your a lot of bucks away in terms of interest amount.

Your card might not apply 0% interest to everything

The zero percent interest rate offer might apply to credit card balance transfer or to purchases. An interest free credit card might not apply 0% interest to everything you want to do with it. So, be sure to read the terms, rates and fees associated with the credit card you are about to apply in order to prevent any unpleasant happening in near future. You can also ask the customer service officer about terms and conditions before signing the final credit card agreement. By knowing and understanding the fact, you can buy a credit card that aligns your individual needs.

They can lower your interest payments

Balance transfer from your interest free credit card to another one is the best way to lessen the burden of credit card debt as it can help you prevent higher interest rates that you need to pay at the end of month. The bad news is that you are not guaranteed by the card provider to get the full balance transferred. It means you are responsible for making the payment of your old credit card along with your interest free card at the same time. And it can have a direct impact on your finances.

You may need good to excellent credit

In order to apply for an interest free credit card, you may need a good to excellent credit history. In simple words, an individual cannot sign up for a 0% interest credit card with poor credit scores. Someone with 650 and above credit score is considered as a good applicant for these cards. That is the reason, you should check your credit score before you apply for an interest free credit card in order to get your application accepted and approved.

They may charge hidden fees

Not all 0% interest cards are truly interest free on everything you are about to do with them. They are created to make money somewhere you may not be aware of. While some of the card providers offer 0% interest on purchases, they might charge you with some fee when transferring your credit from one card to another. These cards may also come with some fees in terms of late payment, cash advance and overseas transactions. That is the reason, you should read the terms and conditions carefully to avoid any hidden fees if any.