Wouldn’t it be great if you could make purchases on your credit card without having to pay any interest?
Well, you can.
Sure, traditional credit cards come with specific interest rates that are charged against outstanding balances, and these rates tend to be pretty high. In fact, credit card interest rates tend to be among the highest for loans and credit. If you can somehow avoid paying these exorbitant rates, you could save a ton of money, especially on large purchases.
In fact, that’s exactly what Joe did. He furnished part of his home by making purchases on credit without spending a dime on interest.
How? With balance transfer cards that offer 0% APR. Joe used 0% APR balance transfer cards to help him make large purchases on credit without paying anything towards interest.
The first purchase on his list was a new refrigerator for his kitchen after his old one finally kicked the bucket. But rather than adding this purchase to a traditional interest-charged credit card balance, Jim used a simple strategy using 0% APR balance transfer cards that prevented him from being charged any interest.
The plan worked so well for Joe that he intends to use the same strategy to purchase living room furniture.
So, how exactly did Joe use these balance transfer cards to buy big-ticket items with no interest? Read on to find out.
What Are Balance Transfer Cards?
A balance transfer on a credit card basically means moving any outstanding debt you have on one credit card to another with a lower interest rate. There are many credit card companies that offer free balance transfers.
Many times they’ll even offer an introductory period (typically between 6 to 21 months) where they don’t charge any interest at all as an even better incentive to make the switch. When used properly, these 0% APR balance transfer cards allow consumers to take advantage of the benefits that credit cards offer, without the hefty interest rate.
You’re only allowed to transfer a balance up to your credit limit on the new balance transfer card. That means you would only be able to transfer $7,500 onto your new card if that’s your credit limit despite wanting to transfer $10,000, for instance.
You usually won’t be able to transfer your balance between two different credit cards issued from the same issuer. For instance, you can’t transfer your balance from one Discover credit card to another.
How to Use 0% APR Balance Transfer Cards to Avoid Paying Interest
As great as 0% APR balance transfer cards are, they need to be used strategically in order not to get slapped with high interest and penalty fees. A credit card that doesn’t charge interest can still land you in trouble if you’re not careful with it. Just because there aren’t any interest charges today doesn’t mean you won’t be charged any interest in the future.
Here’s how to use these cards to work in your favor.
Find out the exact length of the introductory period. As already mentioned, these types of cards offer 0% APR, but only for a limited amount of time. Once that introductory period expires, you’ll be responsible for paying interest on any balances you carry. The balance transferred is subject to interest if you don’t pay it all down before the introductory period ends. That’s why it’s important to understand how long this promotional period lasts before you start making big purchases.
Be wary of other fees. While you may not be charged any interest on your balance transfers, you’ll likely still be charged a balance transfer fee. This fee typically ranges between 3% and 5% of the amount transferred.
Ensure that you’ve got the funds needed to pay back the balance before the promotional offer ends. Since the interest rate on your balance will be set to the stated rate once the promotional offer is over, it’s essential that you have enough money to pay down the balance before that time period ends. The best way to do that is to calculate how much your bills will be every month based on the amount of the balance.
For instance, if you purchased a refrigerator for $2,000 like Joe did, you’d need about $111 per month based on an 18-month 0% APR introductory period. If you think you can manage to pay $111 per month, then this type of card could definitely work in your favor.
Use these cards only for items you already intend to buy. Don’t use these cards to buy anything just because you won’t be charged any interest. If you do, you’ll just end up racking up your balance and wind up with a massive debt load that you could end up having to pay interest on if you don’t pay it off in time.
Balance transfer cards that offer a 0% APR introductory period can help you make large purchases without having to get stuck paying high-interest rate fees on the balance. That’s typical of the average credit card that usually comes with sky-high rates. But with a balance transfer card that charges no interest on balances for a certain time period, you can save a bundle.
That said, it’s crucial that you use these cards responsibly and plan your strategy before you take one out. Make sure you only use balance transfer cards – and any other credit card for that matter – for planned purchases that you’re sure you can repay.