Zero Interest Credit Cards - What You Need To Know

Zero interest credit cards can be a great deal, but you do have to be careful and understand exactly what you are getting into before you apply. For a good summary of the potential pitfalls and rewards of zero-interest credit card offers, check out http://www.bankrate.com/brm/news/cc/20020430a.asp. Not all offers are necessarily good for your personal situation, and just because you have received a ‘pre-approved’ offer doesn’t mean you will actually be approved for zero interest.

Often, zero interest credit card offers are mailed out fairly indiscriminately, but then when it comes to actually underwriting the applications sent in response, the lender becomes very scrupulous. You may receive a card without the teaser zero interest rate instead. You might even be turned down even though you received a ‘pre-approval’ letter.

Pay attention to the zero interest credit card terms and conditions. Is the zero interest rate available on purchases and balance transfers, or only on one or the other? How long is the introductory rate in effect, and what does the rate become after the zero rate expires? Is there a balance transfer fee or an annual fee? Are there any hidden fees such as application fees or credit insurance requirements?

Zero interest credit card offers usually require very good credit. If you have been transferring a balance around to various zero interest offers for some time, chances are your credit is no longer stellar and you might be much better off to just work on paying down you balance on the card you currently have.

A number of websites allow you to compare zero interest credit card offers along with their terms and conditions, side by side, so you can more easily judge which, if any, are a good deal for your particular situation. A useful site that offers this feature is Apply For A Credit Card Now.com .

For an in depth analysis of credit card company abuses including deceptive zero interest credit card deals and other controversial but common credit card companies, check out the following PBS transcript from the show Frontline:

http://www.pbs.org/wgbh/pages/frontline/shows/credit/interviews/mierzwinski.html

Zero interest offers are sometimes sent out to purposely snare people with high debt-to-income ratios so the credit card company can collect a balance transfer fee of as much as 3%. On a transferred balance of $8000, that’s $240 in fees just to get the zero interest rate for six months. So it isn’t as though you are getting something for nothing. Then, as if that isn’t enough, if you fall behind on other cards or make a late payment on a completely unrelated debt, your new credit card company can drop your zero percent introductory rate and charge an even higher interest rate than the card you just left behind.

In other words, you really have to think your situation through and read all the fine print before you jump at a zero percent interest credit card offer. If you already have great credit, such cards can be worth the switch. If you are looking for a way to pay down a balance that is already causing you some pain, you may actually be better off in the long run to get some credit counseling and just pay off your debt.