No Interest Credit Cards
Everyone likes the idea of free money. While no money is truly free, there is a financial product that offers temporary free money. It’s called a no interest credit card. Companies offer these credit cards for a variety of reasons. They work as free money because there’s no interest payment on the balance. That means you only need to repay what you owe.
This article will tell you everything you need to know about no interest credit cards. We’ll cover what it is. We’ll also look at the reasons why you might consider getting a no interest credit card. Finally, we’ll go through the different things to look at to ensure you only look at the best no interest credit cards. Use this information to make sound financial decisions and get yourself out of debt.
What is a No Interest Credit Card
A no interest credit card is an offer from a credit card company. It works just like a regular credit card. The only difference is that you don’t pay interest on your charges. Well, that’s only mostly true. You see, many credit card companies use no interest credit offers to get people to sign up for the card. The 0 interest period is limited. Some offers are for credit cards with no interest for 18 months. Others offer credit cards with 21 months no interest.
As you can see, the no interest period is limited. Each credit card company and bank have different offers for no interest credit cards. Therefore, there’s no such thing as a credit card that will never charge you interest. After all, interest is how banks and lenders make money on their deals.
That means there’s a lot to consider when it comes to finding the best no interest credit cards. We’ll look at that in a second. First, it’s important to understand why you might want a 0 interest credit card in the first place. There are lots of valid reasons, and we’ll cover those in the next section.
Why You Get a No Interest Credit Card
The first thing to keep in mind is that you shouldn’t get a zero interest credit card just because you want to do some impulse shopping. That’s how credit card companies and banks can get away with making these offers. People get a no interest credit card and then use that fact to justify buying things that they don’t really need.
Instead, you should get a zero interest card for a specific purpose. There are lots of reasons why a 0 interest card can help out your financial situation. There are also reasons why you might want to get a card with no interest because it makes sense from a financial planning perspective.
That’s important to keep in mind. You shouldn’t let yourself be tempted by an inferior card because it offers different kinds of perks or rewards. Even the best credit card for travel rewards for example comes with interest. Those kinds of offers can lead you to getting a worse card and putting yourself at a financial disadvantage for the future. When you’re looking for a zero-interest credit card, you should plan to use it only for specific types of purchases that you’re confident you’ll be able to pay off before the zero interest period ends.
The first reason you should consider a zero interest card is to make major purchases. We don’t mean get a card and go out and start buying big items. Instead, this refers to a purchase that you know you’re going to have to make. For example, if your car needs expensive repairs or if a major appliance in your house is about to break down.
A no interest credit card offer is great for things like this. That’s because you can use the card to make your planned purchase and then pay off the purchase before the introductory offer expires. This way a no interest card actually saves you money. Using the card for impulse buys or every-day shopping doesn’t make sense because you’ll eventually have to pay interest on those charges if you don’t pay off the balance.
However, interest free credit card offers can help you avoid costly interest and financing charges that you’d get on a loan or other forms of credit. Therefore, it makes sense to use the card for a planned major purchase. You should make the purchase, make your monthly payments to pay the card off, and then stop using the card once the introductory offer expires.
The next reason to get a no interest card is for a balance transfer. A lot of people search for the best no interest credit cards with no balance transfer fee. That’s because you can transfer your balance from a card with a high interest rate to the zero interest card.
Once you do that, you can start paying down the balance on the new card. This will allow you to pay off the balance faster. As a result, you can get out debt much more quickly than if you just made regular payments on your standard card.
You can understand how much faster you’ll pay off your balance on a balance transfer no interest card by looking at the interest rate. Whatever your interest rate is on your current card, that much or more of your payment goes toward interest. That means if you have an interest rate of 20%, then you’ll be finished paying your balance off 20% or more faster with the zero interest card.
Finally, zero interest cards are a great tool for unexpected bills. No matter how well you plan your finances, sometimes life can throw a curve ball at you. This can come in the form of a car accident, medical bills from an injury or illness, or anything that comes out of the blue.
Zero interest cards allow you to cover those expenses. Once you use the card for the unexpected bill, you can pay if off quickly because you won’t have interest charges accumulating. That means you will be able to cover the bill without putting a large dent in your finances.
This is important because having good finances takes planning. When you face an unexpected bill it throws your planning out the window. A no interest card lets you minimize the damage done to your careful financial planning so you can stay on track to meet your goals.
Getting the Best No Interest Credit Card Possible
Now that you understand what a 0 interest credit card is and know why you might want one, you need to figure out how to get the best no interest credit card possible.
This can be a tall order. After all, many banks and lenders offer zero interest periods on a lot of their products. That can make it difficult to sort through the different options. Also, just because a card doesn’t charge interest doesn’t mean there aren’t other ways that the credit card company can get your money. Use this information to find the best 0 interest credit card for you. If your score just isn't good enough to get approved you can try to get a credit card with bad credit requirements.
Length of No Interest Period
The first thing you want to check is the length of time you’ll have zero interest. Most credit card companies offer a range of products with zero interest for different periods of time. Some might have a no interest credit card for 24 months. Others might offer credit cards with no interest for 18 months.
Getting the length of the introductory offer right is important. That’s because if you don’t pay the whole balance off before the introductory period ends, you’ll be hit with the accumulated interest from that period.
To be even more clear: zero interest doesn’t mean zero interest forever. Once the introductory period is over, the company will charge you interest on all the purchases you made with the card unless you have a zero balance.
That can come as a sharp surprise for lots of consumers. Many people think that interest charges only start accumulating once the introductory period is over. However, that isn’t the case. That’s why it’s important to be sure you have enough time to pay off the complete balance on the card. It also shows why it’s important to carefully read the fine print whenever you’re considering a line of credit or loan. Make sure that after the introductory zero interest perdiod is over that they are also low interest credit cards.
Interest Rates After Introductory Offer
The next thing you should look at is the interest rates after the zero interest period. Once the promotional period is over, the credit card works just like any other card. You may want to use it again if something else comes up and you either can’t or don’t want to apply for a new card.
This is also important because you need to plan for worst-case scenarios. If something happens and you’re not able to pay off the balance on your card, then you need to be able to handle the interest charges that you’ll incur. Therefore, you want to pick a card that has the right combination of a long zero interest period and low rates once that introduction period is over.
Fees Associated with Card
Finally, you need to be aware of any fees associated with a no interest card. Fees are another way that a credit card company can make a profit on your account. That means some zero interest cards will have steep fees associated with them. These might come in the form of annual fees, service fees, processing fees, and more.
One of the most common fees for a zero interest credit card is a balance transfer fee. Companies are aware that lots of consumers use zero interest cards to pay off their current credit card balances. Therefore, they sometimes charge fees on balance transfers.
The balance transfer fee can be higher than you think. Some companies charge 10-15% of the balance you’re transferring. That can wreck the plans you make to use the card to pay down your credit card bill. It adds a large amount to the balance on the card. If you don’t pay off the whole balance on the card, including the balance transfer fee, then you can be hit with interest on the complete balance you carried on the card during the introductory offer.
If you’re looking for a way to reduce your credit card debt, make sure any card you consider is a 0 interest credit card no balance transfer fee. These types of cards don’t usually have the same perks as other types of credit cards do. For example, you’re not likely to earn miles, points, or cashback bonuses with a 0 interest credit card with no transfer fee. Take a look at the best cash back rewards credit cards we reviewed.
However, you should be ok with that. After all, you’re not using this card to cover every-day expenses. You’re using it as a financial tool to help eliminate your credit card balance. That means the lack of a balance transfer fee is more important than the ability to get points, miles, or cashback. In the meantime, if you're still wanting to get miles we recommend you do an airline credit card comparison.
Make the Right Call with Zero Interest Credit Cards
As you can see, there are lots of reasons why you might want 0 interest credit cards. Some people use them for planned major purchases. Others use them to get out of credit card debt they’ve already accumulated. Still other consumers use zero interest credit cards to cover unforeseen expenses.
There’s also a lot to consider if you want to get the best deal. Make sure the zero-interest period is long enough that you can be confident you’ll cover the balance. Don’t let yourself be surprised by retroactive interest charges. You’ll also want to closely check the interest rates offered on the card once the introductory period is over.
Finally, to get the best deal, you’ll need to investigate any fees associated with the card. This is especially important if you’re planning on using the card for a balance transfer. Steep balance transfer fees can be as bad or worse than the interest you’re currently paying. They can also make it impossible for you to cover the balance before interest charges kick in.
Use this information to make smart financial decisions when you’re considering your next no interest credit card. These products can be powerful tools to help people when used correctly, but they can also push you further into debt if you don’t carefully consider your actions. Check out our travel credit card offers if you travel a lot.
Financial Advisor - MoneyBeagle.com
David is our in-house financial advisor with years of experience in the credit card industry. He became interested in credit cards after working for several years at a major bank. He holds a Masters Degree in Finance.