0% Interest Credit Cards
Are 0% interest credit cards really free of any Interest charges?
Yes, but not forever. 0% interest credit cards offer the 0% interest deal for a limited time, during which any purchases you make will not attract any interest charges, so long as you pay off the full amount of these purchases before the end of the 0% interest promotional period. This promotional period can last for anywhere between 6 and 24 months.
However, if you fail to repay the total amount spent on purchase prior to the end of the promotional period, or of you breach any of the cards terms and conditions your purchases will incur interest charges at the cards revert rate. This revert rate tends to either the cards Purchase or Cash Advance rate.
How to make sure you pay no interest with 0% Interest Credit Cards
1. Don’t over spend and stick to a repayment plan
A condition common to all 0% Interest Free Credit Cards is that any balance related to purchases made on the card, which is outstanding at the end of the 0% promotional period will incur interest charges immediately the 0% interest promotional period ends, at the stated revert interest rate.
For example, if you spent $5,000 on your 0% Interest credit card and repaid $3,000 during the 0% interest period.
When the 0% Interest period ends and the revert interest rate commences, interest will be charged on the outstanding $2,000.
To avoid incurring any charges on the purchases you make during the 0% interest promotional period you simply must repay the total amount you have spend prior to the end date of the promotional period. A good approach to this is to pay of the full balance due each month, which will mean you will not be left with large amount to repay when the promotional period ends.
2. Manage 0% Interest Credit Cards carefully to reap the zero interest rewards
The 0% Interest period is a promotional offer which are subject to a raft of stringent terms and conditions, which if breached can lead to the promotional offer being withdrawn or cancelled by the card provider.
Failure to make the minimum monthly payment on 0% interest credit cards is the condition that is most commonly breached. When considering a 0% interest credit card be sure to establish that you will be able to make these monthly payments as not doing so will in effect make the card worthless to you as the card will simply revert back a standard purchase card with no 0% interest benefits.
The second common breach of card providers terms and conditions is over spending on 0% interest free credit cards which sees the card holder exceeding the maximum credit limit approved by the card provider.
The penalty for breaching the card providers terms and conditions can be severe and expensive with some withdrawing the 0% Interest Free rate, so manage your card carefully and check out the small print prior to making any application.
3. 0% interest credit cards offer interest free periods on purchases
The 0% Interest rate does not apply to all transactions made with 0% Interest Credit Cards, the 0% deal only applies to purchases that are made using the card. The definition of “purchases” may vary slightly between card providers so its wise to check this prior to making any application.
Any cash advance made using the card will not be subject to the 0% interest rate, these will be charged at the cards cash advance rate and may also incur an additional handling fee which is usually around 2-3% of the cash advance amount.
Using 0% Interest credit cards for transactions that lie outside the card providers definition of purchases will incur interest at the cards standard cash and purchase rates. To avoid incurring these interest charges avoid using the card for exempt transactions such as ATM withdrawals, purchasing foreign currency or attaining credit at casinos, as each of these transactions would not qualify for the 0% interest rate.
4. Are 0% Interest Credit Cards the same as Interest Free Period Cards?
No, these 2 types of credit card are very different.
Interest Free Period cards - are credit cards which offer up to a number of days interest free, across each statement cycle, on any valid purchases made with the card. This period generally is up 45 - 55 days and is dependent on the cardholder repaying the card balance in full each and every month.
0% Interest Credit Cards - credit cards that do not charge interest of eligible purchases, across affixed term, so long as the minimum monthly repayment is made each month. These periods generally last for between 6 and 24 months.
5. Paying just the minimum repayment each month can lead to interest charges
Choosing to repay just the minimum monthly repayment each month will mean your account will not go into default and your purchases will still benefit from the 0% interest rate, though your outstanding balance will be building each and every month. The danger with this minimum monthly repayment approach is that at the end of the 0% interest period you will potentially have a large balance, which if not repaid by the expiry date of the 0% offer will incur interest charges at the revert rate. To avoid paying any interest charges on the balance you would have to pay the outstanding balance in full prior to the expiry date.
An alternative approach to avoid the burden of a large balance to be repaid at the end of the 0% promotional period is to work out a repayment schedule designed to keep the balance on your card in check, to establish a repayment schedule simply divide the balance on your card with the number of months left of the 0% promotional period, this amount should then be the amount you repay each month, assuming you make no additional purchases with the card.
6. How does the Revert Interest Rate work?
When 0% interest credit cards promotional period expires any balance outstanding on the card will incur interest at the revert rate, this rate tends to be either the cards purchase or cash advance rate.
Any purchases made using the card post the expiry date of the promotional period will incur interest charges at the cards purchase rate subject to the cards terms and conditions.
Comparison of 0% Interest Credit Cards
Credit Card Comparison is all about assessing the features and benefits of credit cards relative your personnel circumstances, the way you manage your cash and debt and your credit requirements. In the case of 0% Interest Credit Cards there are some specific criteria that should be included in your comparison as these cards do have some unique features that are considered here:
Duration of the 0% Interest Period - this is also often referred to as the 0% promotional period, and is the fixed period of time over which eligible purchases will not incur any interest charges. 0% interest periods are available between 6 and 24 months, all of which are subject to some stringent conditions which if not met can see the 0% interest rate withdrawn from the card.
Revert Rate of interest - The day after the expiry of the 0% Interest Period any purchases you make with the card will incur interest at the revert rate. This revert rate will also be applied to any balance which you fail to repay within the 0% promotional period.
If you are planning on retaining the card post the expiry date of the 0% Interest Rate deal assessment of the revert rate will be a major consideration, as it this rate which any future purchases made with the card will incur interest at.
Annual credit card fee - 0% Interest credit cards generally attract an annual fee that is usually added to the balance of your card on the 1st day of the 0% Interest period. Higher annual fees generally mean a deeper range of card benefits, assessment of the value of any benefits to you, relative to the annual fee charge should be part of your credit card comparison, as a high annual fee can quickly negate any savings made from the 0% interest deal.
Complimentary Insurances - A number of the 0% interest credit cards also offer a range of complimentary insurances. These insurances provide instant value, for example if you are planning on paying for your holiday with your 0% interest card, the card provider will provide complimentary holiday insurance for the trip, generating an instant cash saving.
0% Interest Credit Cards terms and conditions - Prior to applying, carefully study the terms and conditions looking out for how the deal, particularly the purchase rate, changes when the promotional period ends, and any clauses and penalties that allow the card provider to withdraw the 0% interest rate.
Purchases 0% Interest Credit Cards are suited to - These interest free cards are ideally suited to situations where you are planning on making a large purchase, or perhaps a number of purchases that they know you can't afford to pay off in one lump sum. For these purchases 0% Interest Credit Cards enable you to buy now and pay later, and only pay the original cost of the item(s), so long as you pay the minumum monthly repayment amount each month and clear the total balance before the end of the promotional period. To make these purchases on any other card would make you liable for the purchase rate of interest, which may be up to 20%.
0% Interest Credit Cards - Frequently Asked Questions
No unfortunatley not. You will pay 0% intertest on any purchase you make during a promotional 0% interest period, which can span for between 6 and 24 months. During this promotional period you will still need to make a minimum repayment each month and to repay the whole blanace of your purchases before the close of the promotional period. If you don't meet these 2 conditions the card provider may withdraw the interest free rate which will revert back to a higher rate.
For 0% interest credit cards, the minimum monthly repayment is usually in the range of $20 or 2% of your outstanding balance, whichever is higher.
To retain the 0% deal on your purchases you will need to make this minimum payment each month. This minimum payment must be made by the date shown on your statement, and remember this is the date your card provider should receive the payment, not the date on which you make the payment, so allow some time for your payment to recah your providers account, a couple of days is ususlly suffice.
No. this promotional 0% interest rate only applies to eligible purchases made on your card within the promotional period. Purchases which are not generally eligible for the 0% promotional rate are ATM withdrawals, Foriegn Currency Purchases and the purchase of chips at Casinos. For the full list of inelligible purchases check the terms and conditions of the 0% interest credit cards you are comparing.