Zero Percent Versus Deferred Interest Credit Cards
Short Term vs. Long Term: 0% interest cards can be great for short term purchases, when you intend on paying of the balance in a short period of time. On the other hand, making large purchases, which cannot be paid off quickly, can actually cost you more. For example, if you can use a credit card with a 15% interest rate (for the life of the card) or a 0% card that will increase to 29.99% in three months, it may actually be in your best interest to use the 15% card if you don't plan on paying off the balance in three months.
Know your minimum payment requirements: Minimum payment requirements on 0% cards are always low, which entices consumers to "only pay the minimum" and not make much of a dent in the outstanding principal. Therefore, when the rate goes up, the credit card companies are able to charge a higher interest on a bigger balance.
Credit Score Impact: Most consumers tend to "max out" 0% cards very quickly. This action can impact credit scores, as a portion of your credit score is based on your debt ratios (how much credit you have in use/ how much credit you have available). High debt ratios can reduce your credit score.
"If you take the time to ask the right questions, before you sign on the dotted line, you can save a lot of interest payments and other fees," Flores said.Follow GreenPath Debt Solutions through social media (search greenpathdebt): Facebook, Twitter and YouTube. About GreenPath Debt Solutions GreenPath Debt Solutions is a nationwide, non-profit financial organization that assists consumers with credit card debt, housing debt and bankruptcy concerns. Their customized services and attainable solutions have been helping people achieve their financial goals since 1961.
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