When shopping around for a credit card, most financially savvy individuals pay close attention to the interest rate. Interest is typical with a credit card and other types of financing. The interest rate determines how much you pay in interest each month, and can also impact how fast you’re able to pay off the balance. Fortunately for people shopping for a credit card, 0% interest credit card deals are available. But before you get excited and submit an application, here are a few things to know.
1. You may not qualify for the 0% interest rate.
Credit card companies love to advertise 0% interest credit cards as if everyone who applies will qualify. However, this couldn’t be further from the truth. While credit card companies do legitimately offer 0% interest on some credit cards, the pool of applicants who can qualify is often slim. For the most part, these credit card deals are reserved for applicants with the highest credit scores. The credit score minimum varies by credit card company, but applicants typically need a score in the high 700s. A low debt to income ratio is another qualifying factor, and some credit card companies require a minimum annual income.
2. Bonus point teaser.
Credit cards that offer 0% interest typically include a rewards program. With the rewards program, applicants earn points, cash or miles for every dollar they spend. To encourage applicants to use the credit card, some credit card companies offer bonus points or miles if applicants spend a certain amount of money within 90 days of opening the account, typically $500 to $3,000.
From an account holders standpoint, this is an excellent way to rack up points quickly. From a credit card company’s standpoint, this is an excellent way to get account holders to pay interest in the future. Zero percent interest is an introductory rate that expires after 6 to 12 months. By encouraging applicants to charge a large amount to the credit card within the first few months, credit card companies are betting on the fact that applicants will maintain a balance after 6 to 12 months, at which time the standard APR kicks in.
3. Zero interest may not apply to balance transfers or purchases.
Depending on the credit card, 0% interest applies to both balance transfers and purchases. But in many cases, it’s either one or the other. For example, a credit card may offer 0% interest on balance transfers, yet charge the standard APR on purchases. It is important that you read the application terms carefully. Does the 0% interest apply to balance transfers, purchases or both? When does the 0% interest rate expire?
4. You can forfeit the 0% interest rate.
If you’re approved for a credit card that features 0% interest, make sure that you pay your credit card statement on time every month. This rate is subject to timely payments. With that said, the credit card company exercises the right to revoke your 0% interest rate and charge the standard APR if you skip a payment, whether intentionally or accidentally. To stay on top of your monthly payments, don’t wait until the last minute, set up payment reminders or schedule automatic payments with your bank.