Getting the Most Out of Interest Free Credit Cards

February 6th, 2012 - 
No Comments
Tags:
, , , , , , , , , , , , , , , , , , ,

Interest free credit cards offer an excellent way to reduce the amount of interest you pay each month on your outstanding debts. However, if you do it the right way, a good interest free credit card can also be very helpful for debt reduction plans.

Unfortunately, if you’re not careful with these types of cards, you could also find you end up in more debt than you expect. Banks can be quite crafty with the way they word their offers. Always make sure you understand exactly what you’re getting into and then stick to your plan. You’ll save plenty of money this way.

Here are some ways you can get the most out of interest free credit cards.

Interest Free Purchases

0% purchase credit cards sound like the ideal solution. You get to charge your purchases on plastic and not have to worry about exorbitant interest charges adding onto your original debt balance.

Yet, not all credit cards offering a zero per cent deal work in exactly the same way. In order to really see zero interest charges on the things you’ve purchased with your card, you need to double check that your card offers 0% on purchases made, and not just offering no interest on balance transfers. (more…)

Posted in:
Uncategorized

The Big Secret Of 0 Apr Credit Cards: Debt Reduction

September 23rd, 2010 - 
No Comments
Tags:
, , , , , , , , , , , , , , , , , , ,

The Big Secret Of 0 Apr Credit Cards: Debt Reduction

Americans have fallen into the debt trap to an extent that our grandparents could never have imagined. We have to have everything, and we have to have it now. As a consequence, many of us are drowning in credit card debt. Here is a possible solution.

The days of low prime rates are over now, and 0 APR credit cards are harder to find. Not impossible, though. Many companies still offer 0 APR credit cards for limited period only so that they can attract new customers. This initial period of up to 12 months can save you buckets of money if you have high interest credit cards.

This is how to you can handle it: First, transfer your balance from your high interest credit card to your new one. This will lower your monthly payments and save you money every month. Second, dont go shopping yet. Rather, take these savings and pay down the balance on your credit card. Now youre paying principal instead of interest. Do this for the entire initial period and youll be surprised at how much you can pay off your balance.

Third, dont use your new credit card to spend more money, because when the higher interest rate becomes applicable you could end up with an even higher balance that you had before. Once the 0 APR period ends, you can take advantage of the extra money provided by lower payments, right? Maybe. Since youve gotten so used to high credit card payments, why not delay your gratification a step further and continue to make payments at the same amount, thereby paying off the debt faster? In this way your new credit card can be used to motivate you to eliminate your long-term credit card debt. Note that your 0 APR credit card should never be used to spend more only to lower your debt. Once the higher interest rate kicks in, your new line of credit is a useless to you as your old one was.

What debt management offers you is freedom after all, which would you rather have, peace of mind, or more stuff that you probably dont need anyway?

Posted in:
0% APR Credit Cards

The $10,000 Credit Card Challenge

September 20th, 2010 - 
No Comments
Tags:
, , , , , , , , , , , , , , , , , , ,

Thinking about conquering your mountain of debt but too scared even to give your debt much thought? Read this real-world scenario of how one person erased $10,000 of credit card debt within a few years.

Ever wonder how some people deep in credit card debt manage to come out on top financially? This is the hypothetical but realistic story of Emily, one person who dug herself out of $10,000 in credit card debt in just a few years.

Never a big spender, Emily was shocked when she noticed that her two credit cards had a combined balance of $10,000. What happened?

* Emily took a lower-paying job when the economy went bust at the turn of the millennium.

* Hoping her lower income would be temporary, Emily didn’t sell her house to get one with a lower mortgage. She didn’t sell her expensive car to buy a cheaper one, since she would get much less than she had paid for it. In reality, the thought of driving a less-nice car was painful

* Emily paid only the minimum monthly credit card payment most months. She was paying interest, and interest on interest, buying the privilege of having the credit card company hold onto her debt another month.

* When one of Emily’s credit card balances got within a few hundred dollars of the credit limit, her interest rate on the card skyrocketed from 17 to 27% .

Loans: Emilys Salvation?
Emily considered taking out a loan to pay off her credit card debt. She owned a condominium whose property values had increased 40% since she bought it, so she could easily get a good low-interest second mortgage.

But a loan scared Emily: it would mean admitting her debt would not go away soon. Besides, Emily wanted to get rid of her debt, not trade (her unsecured debt for secured debt). Plus, she knew that if she ever couldn’t pay the second mortgage, she would lose her house, while failing to pay credit card bills would just mean a ruined credit rating.

For about a year, Emily argued with herself over whether to take out a loan to pay off her credit card. Then catastrophe hit: her beautiful car was totaled in an accident. While shopping for a new car with friends, Emily finally had to admit to herself that buying another car like the one she had had would be financial suicide.

Finding an Answer
Emily cried and cried as soon as she got home from the car dealership that day. It wasn’t just that she would have to admit that she wasn’t someone who could afford the car she had been driving. When Emily’s parents were her age, they had already bought a five-bedroom house; Emily’s one-bedroom condominium was already a stretch. If she ever got married to a man with the same financial picture as she had, she wasn’t sure they’d be able to afford children. Growing up, her parents had always told her she’d do better than they had. What went wrong?

Emily did not have to think hard about what went wrong. Her father had been able to pay for college with what he earned at summer jobs, and then got a manager-level job straight out of school. Between college and graduate school, Emily had accumulated $70,000 in student debt that she was still slowly paying off. Houses in Emily’s town, even adjusting for inflation, cost several times what they did when Emily’s parents bought one. Cars had leaped in price about as much. The only thing that hadn’t gone up was income.

Unable to cope with having less than her parents had, Emily had used her credit cards.

Solving the Problem
Emily knew that since her lack of financial skills had dug her into her rut, she would need outside help to dig herself back out.

She had heard about credit counseling services that took large chunks of the payments you made against your debt, so she was careful. She found a counseling agency that was a member of the Better Business Bureau, American Association of Debt Management Organizations and whose credit counselors are certified through the National Institute for Financial Counseling Education. Doing a quick search on the web, Emily verified that these were organizations with real standards and not just empty names.

Here’s what Emily got from the credit counseling service:

* Relief. Emily was relieved to learn that her $10,000 credit card debt is in fact about average for Americans. The credit counseling agency showed her that even if she didn’t have the advantages she hada decent job and home equityshe would be able to rid herself of her debt if she just faced up to it.

* Surprise. The agency urged her to put money away for a rainy day fund, even as her credit card interest mounted. But once she started saving, she felt amazing. She realized she had been under enormous stress from always being one paycheck away from poverty.

* Understanding. The counselor understood Emily’s reluctance to take out a loan, and helped her create a budget that would let her pay off her consolidated debt within a few years. Besides the car, all Emily had to give up were smaller expenses.

* Clarity. With her finances planned, Emily could think much more clearly about her financial situation. She figured out how much more money she would have to make to have her desired lifestyle, and aggressively pursued a new job. Starting fresh with her new coworkers, Emily focused on meeting people who were less materialisticand even met her fianc.

Though her fianc has no better financial prospects, Emily’s confident they can afford to give their children all the essentials she had, even if in a smaller house.

After all, Emily knows that solid finances are just as good a shelter as a roof over your head.

Posted in:
0% APR Credit Cards

How To Have A Trouble-free Life With A 0% Apr

July 20th, 2010 - 
No Comments
Tags:
, , , , , , , , , , , , , , , , , , ,

How To Have A Trouble-free Life With A 0% Apr Credit Card

Having a 0% APR credit card is indeed wonderful, but only if you know how to use it wisely. Heres what you can do to enjoy a trouble-free time with this kind of credit card.

Tip #1 Look for the longest promotional period. 0% APR offers unfortunately never last for a lifetime. They can last anywhere between six months to a maximum of one year. Once that time period expires, youll have to join the rest of humanity and pay interest charges for your credit card. Thus, when looking for a 0% APR credit card, try to find one that you can enjoy the longest.

Tip #2 Look for the lowest possible rates. Once the 0% APR offer expires, youll start facing the risk of paying interest charges if you dont pay your credit card bill on time. And thats why you need for the lowest possible rate from your future credit card. This early, you need to prepare for the future and look for the easiest way out of credit card debt.

Tip #3 Check your credit score. Youre entitled to one free credit report from each of the three major bureaus in the country, namely, Equifax, Experian, and Trans Union. See if youre considered a good credit risk or not. If you fall on the latter category, try improving your credit first before applying for a 0% APR credit card. You can avail services of a credit repair agency if necessary. Once your ranking has improved, thats the time you should apply for a credit card and you just might qualify for even better interest rates.

Tip #4 Multiple credit card applications can immediately hurt your newly repaired credit score so its best to know beforehand what kind of credit card you truly need. Compare rates and features. Ask yourself what else do you need from a 0% APR credit card? Are you more interested in having a low interest card or do you prefer a reward based credit card?

What other privileges, benefits, or features are you looking for in a credit card? Consider having automatic insurance, online management, and customized designs for your credit card. Choose carefully because its best that you only apply for a credit card once.

Tip #5 Prepare other documents you may need for the application process such as proof of identification and income. If you are not yet working and still in school, you will have to submit proof that you are indeed a student. Having excellent scholastic records help, by the way.

Tip #6 Pass your application together with your requirements. If youve completed all the requirements and youre not categorized as poor credit risk, youre sure to have your 0% APR credit card on your hands in no time.

Tip #7 Its time to enjoy your credit card, and you should indeed enjoy it to maximize the 0% APR offer. If youve got big purchases to make, nows the best time to do it because you wont have to pay any interest for it. All you need to worry about every month and for as long as the promo period lasts is paying for the minimum payment required.

Tip $7 All good things must come to an end, however, and the same rule applies to having a 0% APR credit card. At least three months prior to the expiration of your no-interest status, start tightening your belt and try paying off your credit card debt as much as you can. That way, when your 0% APR status expires, you wont have a heavy burden on your shoulders.

Posted in:
0% APR Credit Cards

Are 0% Apr Credit Cards A Magic Debt Solution?

May 21st, 2010 - 
No Comments
Tags:
, , , , , , , , , , , , , , , , , , ,

0% APR credit cards are becoming extremely common in the world today, thanks to a growing problem with credit card debt and a growing awareness on the part of banks and credit card companies that people want to find a way out of their financial trouble. And 0 interest credit cards at first seem like an ideal way out. Imagine, no additional finance charges accumulating while paying down your existing balances… It’s almost too good to be true! And it is almost like magic–in the sense that magic is often an illusion.

This isn’t to imply that the credit card companies are being deceptive when offering 0% APR credit cards, because they aren’t. Their exact pricing policies are right there on the application pages to any 0% APR credit card, though many people just see the big zero and coast on through the application. But before making any financial agreement, especially an agreement to enter into what amounts to a borrower/lender agreement with a bank or corporation, it pays to stop and take a closer look at exactly what you’re agreeing to.

First of all, there’s the well-established fact that 0% APR is always an introductory rate, lasting anywhere from six to twelve months. Since the major way a credit card company makes money is through interest rates, it wouldn’t make much sense for the company to do anything else. At some point, they will have to charge you interest, even on a 0% APR credit card, which is no problem, as long as you know how much interest you’re getting, right?

But it’s still important to look deeper. Many credit card companies charge extremely high interest rates–18% and up–on even 0 interest credit cards, once the introductory period has expired. Often, there are variable interest rates to justify this: a fairly low rate (maybe 11% to 14%) for cardholders with the best credit rating, a medium rate (17% to 19%) for cardholders with still okay credit, and a standard rate (as high, in many cases, as 23%) for cardholders with average credit. Still higher is the default rate, which you enter if the credit card company decides, for whatever reason, that you’ve been making too many late payments or that you’ve become a bad credit risk. At this point, your interest rate shoots up to as many as twenty-four percentage points above the prime rate (8% as of June, 2006), leading to a default rate of a massive 32%.

So imagine this scenario. You’ve gotten into some difficulty with credit balances and you’re looking for a way to stabilize your finances before paying everything off. Say you’ve got $1,000 in your existing balances across several cards. You apply for a 0% APR card with a balance transfer option and consolidate all of your debt on the existing card (assuming there’s no fee for balance transfers.) So now you have a 0 interest credit card with twelve months to pay it off. For whatever reason, your expected financial windfalls don’t come through, or required purchases offset your balance payments and your balance remains constant at $1,000 after a year. Because you’ve got average credit, your APR starts at 22%, adding $220 to your balances the first month, and more thereafter. You miss some payments, bringing your APR up to almost 33%. At this point, a full third of your balances are being added on to your debts every month, and you may start looking around for still more 0% APR credit cards for salvation

With some sound financial prudence and a determination to pay off your balances within the introductory period, 0% APR credit cards can be valuable resource for getting out of debt. But make sure, when you’re trying to get out of debt, that you know what agreement you’re getting into first.

Posted in:
0% APR Credit Cards

5 Pros of Owning a 0 APR Credit Card

April 19th, 2010 - 
No Comments
Tags:
, , , , , , , , , , , , , , , , , , ,

Word Count:Article Body:
When you get the offer in the mail for a 0 APR credit card, you may be tempted to throw it out, thinking that it is too good to be true. But before you toss it in the circular file, take a good look at it. There are some distinct advantages to owning one of these 0 percent interest cards that could help you in ways you dont know yet.

1. Transfer high interest credit card balances.
If you have a credit card that you use often but cant seem to pay off, you can transfer the balance of this card to your new 0 APR card. If you are paying twenty percent interest on another card and have stopped using it because all you can afford to pay each month is the minimum balance, this is a great option for you. You can not only pay off your other balance, but you can also get your purchasing power back.

2. Consolidate all credit card debt to one card.
For people with several credit cards that are maxed out, consolidating them all onto one 0 APR card is the perfect way to pay down the debt quickly. Instead of your monthly payment going to the interest alone, you will be able to pay on the principle for the entire 0 APR introductory period.

3. Transfer high interest rate loan balances.
If you have a car loan that is at an exorbitant interest rate, this is your chance to pay off the loan with no interest. Pay it off at the bank with the 0 APR credit card and then make your interest free payments to the card to pay off this balance.

4. Make big ticket purchases with no interest financing.
Planning to buy some furniture or an appliance? Want to buy some plane tickets to Europe? Use your 0 APR credit card to finance the purchase of these items at 0 percent interest.

5. Improve your credit.
By paying your bill on time each month and paying off balances from other cards or loans, you improve your credit score and better your chances for getting future credit offers.

Posted in:
0% APR Credit Cards

0 APR Credit Card Truths and Traps

March 20th, 2010 - 
No Comments
Tags:
, , , , , , , , , , , , , , , , , , ,

Word Count:Article Body:
If you are struggling with ever-increasing credit card debt, a 0 APR credit card could be the magic wand for you. There are a number of 0 APR credit cards in the marketplace. These 0 Interest credit cards offer cardholders zero percent on new purchases and certain 0 APR credit card offers also allow balance transfers, lowering the interest burden even further.

The Truth About 0 APR Credit Cards

These types of 0 APR credit cards are offered by popular credit card lenders including American Express, Citibank, Chase, HSBC, and Discover. These cards have many benefits to offer if you have a good to excellent credit rating.

Keep in mind, that the zero percent offered with these cards is not permanent. It is an introductory rate and is typically offered for ninety days to as long as 12 months. At the end of the interest-free or zero percent periods, cardholders will have to pay a higher ongoing interest rate. Generally, these rates could vary between 10 % – 14% and sometimes can be as high as 24%.

A 0 APR credit card is ideal when you want to purchase something expensive but cannot find another way to finance it. There will be no interest charges for the in and you will have the introductory buffer period to pay off the expense. But buyer beware … make sure you can pay the purchase off before the introductory APR expires.

Most 0 Interest credit cards allow balance transfers from your existing higher interest cards and many will waive the transfer fees. This is one of the best methods to pay off debts at a faster rate, leading to substantial savings on the interest charges incurred.

It is possible that a single credit card can have multiple APRs including the following:
1) One APR for balance transfers, one for purchases, and one for cash advances the APR normally would be higher for cash advances compared to balance transfers and purchases.
2) Tiered APRs Different APR levels can be assigned for different account balance levels or tiers, e.g., 15% for balances between $1 – $500 and 17% for balances higher than $500, etc..
3) Introductory APR 0 APR as the introductory offer and a higher rate upon expiration of the introductory period.
4) Penalty APR A penalty APR rate may apply if you are late with your payments.

The Traps to Watch Out For:
A 0 APR credit card is an attractive proposition, and often is too tempting an offer to resist. However, it is essential to be informed about the often-untold catches in these lucrative offers.

1. The 0 APR is a Limited Time Offer In general, the 0 APR offered is only for a limited period. The period could vary from 3 months to 12 months. This implies that purchases made during this period will not attract any interest. You need to be cautious about the expiry period and remember to pay off before the period ends inorder to avoid hefty interest charges.

2. Once the introductory period is over, the 0 APR credit card may have a ridiculously high interest rate like 20% or higher.

3. On-Time Payment Most of these 0 Interest credit cards require you to pay the minimum payment on time every month during the introductory period. Late payments will result in penalties that include shifting the remaining balance to a much higher APR.

4. Complete Payment Certain 0 APR cards require you to pay off the balance entirely before the expiration period of the introductory offer. If not, the default high interest rate could be applied to the entire balance. Ensure that you understand these credit card terms clearly.

5. Applicability of the 0 APR Most of the 0 Interest cards offer the 0 APR on new purchases and balance transfers in the introductory period. However, there are some cards that offer 0 APR on balance transfers only with higher applicable APR’s on new purchases.

6. Other Fees Some credit card companies compensate the 0 APR by charging high annual fees or transfer fees on balance transfers.

7. Cap on Balance Transfer Certain cards may have a cap or limit on the balance transfer amount. This means that the 0 APR will apply only for the amount within the cap limit and anything more will be charged the default higher APR.

While it may be an attractive offer to go for 0 APR credit cards, it may not be a wise decision in certain scenarios. So, before you seriously consider a 0 APR credit card, it is essential to compute credit balances, interest rates, and your pay off capability. Read the terms and conditions carefully to avoid credit traps. Understanding the fine print could have substantial savings apart from trouble free credit rating.

Posted in:
0% APR Credit Cards

0% APR Credit Cards: The High Interest Rate Solution

December 20th, 2009 - 
No Comments
Tags:
, , , , , , , , , , , , , , , , , , ,

Over the past two years, the Federal Reserve has raised interest rates substantially. Consequently, credit card annual percentage rates have followed suit. Nearly all credit cards tie their interest rates to the prime rate, which has doubled to 8% from 4% during the string of rate hikes that began in 2004. This has led to interest rates on credit cards rising by 30% or more. Since August of 2006, the Federal Reserve has kept interest rates steady, and many economists believe the next move may be a reduction in rates. However, the rate reductions have yet to begin, and credit card interest rates remain relatively high.

For those who carry balances on their credit cards, high interest rates have resulted in higher monthly bills, with many seeing their minimum payment increase substantially. Fortunately, now, more than in recent years, 0% credit cards offer a safe harbor from high rates. There are two basic types of 0% credit cards: those that offer a 0% rate on balance transfers, and those that offer a 0% on purchases. The best credit cards offer 0% interest on both. How much savings can these credit cards provide? Lets take a look at the math.

Lets assume youre carrying a balance of $10,000. If you simply pay the minimum each month, you will accrue close to $2000 in interest over the course of a year, thanks to daily compounding balances (too bad savings accounts dont pay that type of interest). With a 0% balance transfer, you can expect to save all of that money, plus, youll be given time to pay down that debt. When the 0% period expires, not only is there a chance your interest rate will be lower, but, if rates do not go down, you can always transfer the balance to another 0% credit card. Plus, if you make a minimum payment of $150 a month, your balance at the end of the year will be closer to $8200, rather than $12,000. Thats quite a difference.

Now, if youre fortunate enough to have no credit card debt, a 0% interest rate can be handy tool to avoid interest expenses on new purchases and free up some cash in the short term. Need a new fridge? Have to fix your car? Want granite counters for the kitchen? With a 0% credit card, you can defer the cost of these expenses for a year while taking advantage of high interest rates. How? By placing the cash that would have left your bank account into a high-yield savings account and taking advantage of rewards credit cards.

Lets assume you will make $10,000 of purchases over the next few months. Using a credit card with a 0% interest rate and 1% cashback rewards, coupled with a high-yield savings account with a 4% interest rate can put about $500 extra in your pocket over the course of the year.

Of course, not everyone pays their balance in full each month. With average credit card interest rates in the 12% to 15% range, carrying a monthly balance of only $1000 can cost close to $150 a year. Saving $150 in interest charges may not be a fortune, but its surely enough to buy a nice dinner with a good bottle of wine.

No matter how you use your credit card, a 0% interest credit card can have a positive effect on both short and long term cash flows. Given that the alternative is paying more than 12% in interest, choosing a 0% credit card in this atmosphere of high interest rates is a no-brainer.

Posted in:
0% APR Credit Cards

0% Apr Credit Cards: A Way To Eliminate Debt

December 13th, 2009 - 
No Comments
Tags:
, , , , , , , , , , , , , , , , , , ,

Credit cards are one of the most useful tools in today’s world. With a credit card, you can purchase anything you want without actually carrying any money at all. A credit card works like a loan. Once you purchased an item using your credit card, you will automatically agree to pay the loan once the billing statement arrives.

However, aside from the fact that credit cards can offer you a lot of advantages, you should be aware that credit cards also have some disadvantages. People who own credit cards tend to uncontrollably purchase items they don’t really need. Besides, with a credit card, you can really purchase a lot of things without having any money at all. With this feature, people tend to purchase items more than they can afford.

With this kind of spending, many people get into credit card debt that will seem very hard to pay off. Every month that you don’t pay the bill on time, you will see that the interest rate will rise and you will eventually end up paying more for the interest rate rather than the debt.

One way to pay off your credit card debt is through 0% APR credit cards. This kind of credit card started out as a marketing gimmick in the US. But today, it is now considered as part of the credit card industry. 0% APR credit card plays a very important role to help people get out of debt or at least reduce it.

First of all, you need to know what a 0% APR credit card is. APR is short for Annual Percentage Rate. APR is a reflection of the cost of credit. Therefore, a low or 0% APR is better than standard APR that you will usually see in credit cards today.

0% APR credit cards are very useful if you know how to handle it. This kind of credit card is usually used by people who want to reduce or end their credit card debt, if you have a credit card debt that seems hard or impossible to pay off. For example, if you are 10,000 dollars in debt and you have an APR of 20%, you will end up paying 2,000 dollars in interest payments. With a 0% APR credit card, you can use those 2,000 dollars to reduce your credit card debt instead of paying it for the interest alone.

Now that you see the benefits of a 0% APR credit card, it will truly be wise if you transfer you credit card balance to this kind of credit card. Once you transfer it, you can pay off your debt much more easily.

However, you should keep in mind that a 0% APR credit card is usually only an introductory offer by credit card companies to attract new cardholders. Usually, the 0% APR offer will only last for a minimum of six months to a maximum of one year, depending on the introductory offer.

You should choose a 0% APR credit card that offers a longer introductory period for you to be able to pay off your debt effectively. Also, you should keep in mind that you should keep an eye on the expiration date of the introductory offer in order to avoid a high APR after the 0% APR introductory offer is over.

These are the benefits and the things you should remember when getting a 0% APR credit card.

Posted in:
0% APR Credit Cards