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| The Basics | Play your credit cards for a 0% loan
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You need an excellent credit history, but if you qualify, these deals are worth a look. Just make sure to pay off the balance before the teaser rate expires.
By Bankrate.com
What could be better than a credit-card deal with 0% interest? An interest-free card deal that lasts and lasts.
These days, credit-card offers boast some seriously good terms. If you play your cards right, you could treat yourself to a one-year, interest-free loan.
"It is a great opportunity if you make a concerted effort to get rid of the debt," says Susan Zimmerman, a chartered financial consultant in St. Paul, Minn., and the author of "The Power in Your Money Personality."
"Really try to get a disciplined spending and debt-repayment plan in place so you can sort of beat them at their own game."
To do so, you'll need to qualify for one of these super-long 0% deals, follow the rules to the T and pay off your balance before the teaser rate ends.
"To a certain segment of disciplined consumers, it's a wonderful opportunity," Zimmerman says.
A closer look
If you've got good credit, it's been hard to open your mailbox recently without a 0% credit-card offer falling out. Let's take a closer look at the deals.
"The 0% is a good way to hook somebody," says Howard Dvorkin, president of Consolidated Credit Counseling Services in Fort Lauderdale, Fla. "All the credit-card companies are having a hard time finding good, qualified people to lend money to."
Fierce competition for good credit customers has forced issuers to come up with new ways to sweeten 0% deals. The result? Everything from super-long teaser rate periods to 0% deals on both purchases and balance transfers, and even 0% offers on cash advances.
Pay attention to the details
As good as these seem, you'll want to pay close attention to the details.
Look for fees on transferred balances and cash-advance checks. Some banks reserve the right to jack up your interest rate if you fall behind with your bill -- or with any other creditor. Pay late even once and that 0% rate could be gone for good.
So, before snatching up a 0% offer, grab a magnifying glass and pore over the fine print. Here are some key questions to ask as you comb through the offer:- How long does the introductory rate last?
- What is the card's annual percentage rate after a teaser rate expires?
- Does the teaser rate apply to transferred balances, new purchases or both?
- Does the card charge a balance-transfer fee?
- What about late fees and over-the-limit fees?
It's also important to realize that not everyone qualifies for the 0% rate promised in big bold print. The teeny, tiny print near the end of the credit-card offer explains this. So you could end up qualifying for a card with a higher teaser rate or no teaser rate at all.
If you do qualify for a 0% card offer, that's fantastic. But don't get too comfortable.
To make the most of your interest-free card deal, you'll need to stay on your toes. First off, you'll want to make sure any balances you transfer onto your rock-bottom card deal arrive without a hitch.
Balance-transfer worksheet
Bankrate.com offers a worksheet that will walk you through the steps. It's important to continue making minimum payments on your old card while waiting for a balance transfer to take effect, which could take four weeks. (To use the worksheet, click on the link at left under 'Related Sites.')
If the 0% teaser rate is on balance transfers only, avoid making any new purchases with the card. Issuers have a policy of applying payments to balances with the lowest interest rates first. You'd have to pay off the entire balance transfer before a single penny gets directed to any new purchases you've made with the card.
This is not the credit card to take with you on your next trip to the mall. If you do, you could end paying a truckload of interest on a $50 sweater.
You also want to be incredibly diligent about paying your card bills on time. One late payment and you can kiss that 0% interest rate good-bye.
"Typically, the tickle rates have fixed time periods, but if you screw up during the time period, the gloves come off," Dvorkin says.
You'll want to do everything you can to ensure that your credit-card payments arrive on time, every time. Bankrate has some payment tips and strategies to help. (Click on the link at left under 'Related Sites.')
Wipe debt clean before teaser rate ends
Remember that to make the most of an interest-free deal, you'll want to pay off that balance before the teaser rate ends. And that means getting serious about your debt.
"There's no easy way to get out of debt. You've got to be diligent about paying down debt, and you've got to do it as soon as possible because that way you're paying the least amount of interest," says Brad Dakake, a consumer advocate with Massachusetts Public Interest Research Group.
Of course, the credit-card companies are betting that most people that land a 0% deal won't pay down their debt and that a big, fat balance will linger long after the interest-free period ends.
"What they're hoping is that theres enough customers that move their balances and leave them there," says Les Riedl, executive vice president at Speer & Associates.
Prove them wrong. Use the interest-free introductory period to get rid of your debt. Let the credit-card companies make their money off someone else.
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MSN Money's editorial goal is to provide a forum for personal finance and investment ideas. Our articles, columns, message board posts and other features should not be construed as investment advice, nor does their appearance imply an endorsement by Microsoft of any specific security or trading strategy. An investor's best course of action must be based on individual circumstances.
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