- Written by Will from Holland
- Category: Articles
Let's talk about credit cards. More specifically, let's talk about credit cards that offer you a 0% interest rate!
These days, many retailers (including large shops and companies) offer store-brand credit cards with a 0% interest rate. Their advertisements entice you to purchase expensive items and charge them to your 0% Annual Percentage Rate (APR) credit card.
You can buy that flat screen TV and pay on it over time with no extra cost! Sounds great, right?
No! There's a Big Catch!
If you do not pay the FULL amount of your purchase by the end of the promotion period (usually between 6 - 15 months), or are late on a monthly payment, you are retroactively charged interest.
This means that you pay all the accrued monthly interest over the full period of the loan's term, often on the FULL purchase price (even though you may have made partial payments already), and often at a very high interest rate.
It's possible that you didn't read the fine print before signing up for that 0% interest rate card and missed the 29.99% APR… YIKES!
So what does that mean for your purchase?
Let's say you bought a $1,200 flat screen TV and put it on that retailer's 0% APR credit card.
You agreed to make 12 monthly installment payments of $100 each.
You make 11 payments in time, but you were accidentally late on the last payment.
You are charged 29.99% interest over the FULL $1,200. (It doesn't matter that you already paid off $1,100.)
This means the $1,200 TV will cost you $1,559.88
You are throwing away $359.88 by falling for a 0% trick, and are probably stuck to a credit card with a crazy expensive APR for some time!
This happens a lot, and our goal is to prevent it from happening to you.
So think and budget carefully before you consider signing up for a 0% APR credit card! It's probably cheaper to save up some of your earnings for a few months, and then buy the TV.
And lastly, remember to read the fine print! No matter how boring it may be, read the fine print for every purchase. This is where the important details regarding your transaction/purchase can be found. In some cases, the fine print may read the opposite of the big print.