Protect Yourself from Zero Percent
It is, without a doubt, the single greatest marketing tool in credit card history: the mythical zero percent interest rate. But just like that old saying goes, if it looks too good to be true, it most likely is. In this case, a zero percent interest rate is going to turn out to be a bad deal most of the time, but there are rare occasions when it can actually work out in your favor. Let’s take a closer look at the zero percent interest phenomena and see how you can navigate your way though it.
For many people who are swimming in a sea of high interest rates and unmanageable balances, a zero percent card offer can seem like a bright orange life preserver. But for those that don’t read the fine print, the dream can turn into a nightmare seemingly overnight.
The plain and simple truth is that there is no such thing as a zero percent fixed interest rate credit card. They don’t exist. If they did, credit card companies wouldn’t make any money. The closest thing you can hope for is a card that has two interest rates at the same time. How does this work?
One of the hottest trends in recent years in the world of credit cards is to offer two interest rates at once. The first rate is just for balance transfers. The card company can offer a sweet deal like a low, fixed rate for balance transfers only, but then tack on a much higher, unmanageable rate for new purchases. As underhanded as this technique may seem, it can still work out for the best if you can control yourself. If you transfer over your high balance to a low, fixed rate and then you put the card away in a safe place and not use it, this kind of card can actually be quite beneficial. But the card company is counting on your lack of self-discipline. They bet that while they may not make too much off of your balance transfer, they will make plenty off of your new purchases.
The ideal offer to get is a card that offers a FIXED zero percent rate on all balance transfers and then a reasonable (see: under 10 percent) rate on all new purchases. Sounds pretty good, huh? Well, even a fixed rate isn’t really fixed if the credit card company doesn’t want it to be.
How?
Have you ever noticed the little slips of paper that the credit card company puts in the envelope every month with your bill? These small pieces of paper look innocent, but they are how the credit card company is legally mandated to notify you if they have decided to change your rates. The only recourse you have is to notify the credit card company IN WRITING that you wish to close your account. By closing your account, you will have the current terms of your credit card fixed until you pay off your balance. But be warned, by canceling out your credit card account, you will do damage to your overall credit score. It is essentially the choice between the lesser of two evils.
Zero percent interest rates can be a savior for those drowning in credit card debt. But often, the rates don’t last long and are replaced with much higher alternatives that can spell doom for those that didn’t read the fine print. Protect yourself by making sure you understand the offer before you sign on.