Millions of Americans took advantage of special zero interest promotions during the holiday shopping season. Many of these cards were offered by major retailers, but just as many were offered by the major credit card companies in 2015, and the trend continues today. These cards tend to promote heavy spending on these cards, want that brand new 60 inch TV? No problem simply swipe your card, hey it’s zero interest whats the harm right? Yet these cards often come with hidden unforeseen problems. People should be cautious before signing up.
These cards work by offering a no interest period. If you pay off your balance before this period ends you will in fact have zero interest owed. Yet buried in the contract is always a provision stating that if you do not pay off your balance in full before this promotional period ends you will in fact be hit with deferred interest rates. This happened to me with Pay Pal Credit, I waited to long to pay it off and owed over $240 dollars in interest on my “promotional zero percent interest purchases”. This can easily happen to anyone. It is oh so easy to simply swipe your card and not pay attention to the overall balance owed.
To avoid this problem you should not be pressured at the cash register to sign up for these promotions, and if you are reviewing an online application for a credit card offering this promotion, you should first consult your budget. You will need to pay back anything you charge on these type of credit card offers by the end of the promotional period, and this is where your budget comes into play. You need to first figure out before spending if you can indeed pay it back within the allotted time. If you cannot pay back this interest before the promotional period ends, you then need to ask yourself if you can live with the interest rate that you WILL be charged. If you cannot afford this interest or the idea of being hit with said interest leaves a sour taste in your mouth you still have options. You can always apply for a credit card with more reasonable interest rates and bypass these promotional offers all together.
These promotional offers however can be useful. They can allow you interest free financing of a large purchase. The key to making it work is to use your budget and figure out a monthly payment that works for both you and your budget. If you can figure out a repayment plan that will have your debt paid off by or before the promotional period ends, then you know that this type of promotional offer will work for you.
If you cannot repay the debt before the promotional period ends, this is where the real problems begin. For one you get hit with a huge lump sum interest payment. This interest will in turn accrue more interest if not quickly paid off. If you had trouble paying it off during the promotional period, it stands to reason that the now even bigger debt will take even more time to pay off, resulting in more interest. If you do happen to find yourself in this trap you could try for a credit card balance transfer to a credit card that offers a promotional zero percent interest on credit card balance transfers. Yet this is only a temporary respite from your current problems, you will now be back where you started from as these offers to have a time limit on repaying the debt or you again get hit with more interest at the end of this new promotional period.