Credit Cards

2 big risks of 0% APR cards

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Don’t sign up for a 0% APR card without evaluating these risks.

Key points

  • Some credit cards offer 0% introductory interest rates.
  • These 0% APR cards can be a good option to finance purchases over time.
  • However, they do come with some risks, including the possibility that you charge more than you can afford.

Credit cards are known for their high interest rates, but there is one exception. Some cards offer a 0% introductory rate on purchases. If you sign up for one of these cards, you may not pay any interest on things you charge for a set period of time, such as the first 12 months you have the card.

Being able to finance large purchases at 0% can be a great thing if you need to pay for items over time and don’t want to pay interest. But before you sign up for a 0% APR card, you need to be aware of these two big risks.

1. You may be tempted to charge too much

A big risk of a 0% APR card is that the promise of no interest may tempt you to use your credit cards more often than you should. Overcharging could lead you into credit card debt, which can make your future financial life difficult.

It’s important to remember that you still have to pay the full amount you loaded, even if you don’t owe interest on purchases you made with the card. This means that you will be committing future income that you have not yet earned to pay for purchases you make today.

To avoid losing control of your spending when you receive a 0% offer, you’ll want to make sure you stick to your budget. Whatever charges you make, make sure you have the money in your bank account or a plan to get the funds and pay off the card in a timely manner.

The other big risk of a 0% APR card is that you may end up paying interest after all. This could happen if you fail to pay off your balance in full before the promotional rate expires.

Credit cards have high interest rates when the 0% rate is not in effect. Generally, you’ll only have a limited amount of time, like 12 months or 15 months, when you won’t be charged standard interest charges on the card. If you don’t pay off your purchases in full by the end of this promotional period, you could be stuck paying a lot of interest on the remaining funds due.

To avoid this, you’ll want to make sure you stay within your spending limits and be careful to only load as much on the card as you’re sure you can afford before the 0% promotion ends. By carefully tracking your spending and making a payment plan, you can ensure that high finance charges don’t make the things you charge more expensive in the end.

As long as you’re on a spending plan and don’t charge more than you can afford before the promotional rate ends, a 0% APR card can be a great way to pay for things over time. But you’ll want to be aware of these two big risks before applying for this type of card to make sure you can mitigate them.

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