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6 Facts to Consider before Applying for a 0% Interest Credit Card

February 27, 2018

It is not uncommon to open your mailbox and find an offer for a pre-approved 0% interest credit card. This can be quite tempting for consumers. Hence, it is often seen that individuals immediately check the “I accept” box to get their new card. However, before you take this step, there are a few facts you should consider. Unless you carefully ponder over the points given below, your decision to get a 0% interest card may prove to be a wrong one.

1. Be aware that you may not be approved 

Before sending out these offers, issuers pre-screen candidates on the basis of their credit scores, usually with a soft credit inquiry. Nevertheless, between the time a consumer receives an offer and applies for it, their score or another factor, such as debt, could change, causing the application to be rejected. Even if an individual qualifies for the card, they should remain cautious. This is because if their score deteriorates during the promotional period, they could be hit with an extremely high interest rate once the teaser period expires.

2. There may be a deferred interest clause 

Some 0% interest credit cards include a deferred interest clause in their terms and conditions. This means that if the cardholder is unable to pay off the balance by the end of the promotional period, they may be required to pay interest starting from the time the purchase was made. Always read the fine print to get all of the details of an offer before automatically accepting it.

3. The sign-up bonus could be a trap 

Issuers often try to lure consumers by offering hefty sign-up bonuses in terms of reward points or cash back. However, in order to obtain these, the cardholder is required to spend a large initial amount within a specified timeframe. To get the bonus, if you end up spending more than you usually do, you could have difficulty paying it back and be stuck with an outstanding, rolling balance. The interest that you will be asked to pay on this balance once the 0% promotional APR ends will likely negate any rewards that you may have accrued through the sign-up bonus.

4. Missed payment penalties can be very severe 

Given that it is a 0% interest card, consumers may adopt a casual attitude towards the card and end up making late payments. What they don’t realize is that in these cases, the late fee and other penalties can be very severe. In fact, a late payment may not only ding a consumer’s credit score; it can also void the 0% interest rate agreement. In other words, in the event of a late payment, the issuer may invoke a deferred-interest clause and charge interest right from the date of purchase.

The post-introductory period APR may be very high 

Most issuers do a great job of advertising the 0% interest offer. However, they rarely highlight the post-promotional period APR. In many cases, the interest rate charged after the end of the initial period is so high that it doesn’t make sense to hang on to the card.

6. You must have a plan for balance transfer 

Perhaps the best use for a 0% interest rate card is that it offers a consumer the opportunity to transfer a balance from a higher interest card and then pay it off before the promotional period expires. However, before doing so, the cardholder must put in place a concrete plan. He or she should calculate how much is needed to pay back every month in order to bring the balance down to zero before the end of the introductory period. Otherwise, the cardholder may end up paying higher interest than the original card on the remaining balance. The cardholder must also take into consideration balance transfer fees (normally 3% of the amount transferred) and confirm whether the issuer will allow the entire amount to be transferred from one card to another, as many card companies have a limit on the amount that can be transferred.

Zero-interest credit cards can be very useful for those individuals who need funds for a limited period of time for purposes such as financing their small business. However, not everyone can qualify for this type of funding. For such consumers, Fund&Grow has a great solution! We offer individuals with good credit the opportunity to obtain $50,000 - $250,000 of unsecured credit at 0% interest for a period of up to 15 months. We do all the legwork for you and help you every step of the way. So if you need funding to start or grow your business, call us at (800) 996-0270 and let’s see what we can do for you.

Ari Page Ari Page is the CEO of Fund&Grow. He resides in Spring Hill, Florida with his wife and two children.

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