In many financial advice, you may notice the term of 0% APR as one of the most repeated solution for credit card debt, payment, etc. This blog post will reveal the meaning of 0% APR as well as some main benefits you must be aware.
What does 0% APR stand for?
APR is the short term of Annual Percentage Rate. It presents for the annual interest rate you’d be charged when you borrow amount of money from lenders or banks. And of course APR determines the cost of borrowed money as long as you can’t afford to pay off your debt.
So what does 0% APR mean? Basically it’s an offer from several low credit card issuers, you’re able to avoid any financial interest on top of your debt in a period of 6 – 18 months. Issuers require you to pay off all balance before the end of introductory period, unless you have to shoulder a crazy high rate (15% or even higher) on the left balance.
Because 0% APR is really strong a tool to solve many individual’s financial problems, therefore everyone wants to own it one. But, of course, bankers won’t publish it easily for you to abuse. In fact, 0% APR credit cards or loans are designed for a selected group only. The most common condition is a good credit score or having a noteworthy down payment (minimum number is 10%) for other kind of loans. So keep in mind, asking your new lender or merchant whether you’d be eligible for a 0% APR cards before making a decision.
Related story: How to avoid interest on credit cards
Why is 0% APR so hot?
#1 Decrease your credit card debt
You are handling a debt from previous bills, the payment and late fee make the time to get away from debt would count as years. Wow! Let’s move your hight interest debts to a 0% APR as a balance transfer, your new interest payment will stop in a period up to 18 months. At this point, you can focus on the payment plan for current debt and try to pay it regularly on time to strengthen your credit score.
Notice: You will be charge 2 -5% for the transfer fee once, after that you enjoy an interest-free time to pay off the debt as soon as possible.
#2 Using in the holidays
In holiday season, you must buy, yes must open the pocket, and using a interest-free credit card will save you from drowning in a terrible debt after that. On top of that, there always are some promotions of cash back and extra services like 5% cash rewards, free shipping or double reward points in bills at some merchants. But you must remember to pay off all balance in the introductory period after all.
#3 Buying a major item
It is when you buy a significant expensive product, one-time purchases like home appliances. Instead of swiping a common credit card and being struggle to pay off the interest, 0% APR credit card can make your life easier without paying some extra cost.
#4 Closing other loans
Similar as paying down credit card debts, 0% APR balance transfer gives you a head on big loans like car loans, house loans or student loans. According to experts, an interest-free balance transfer should be utilized at the end of closing one of above sort of debts because we all know the interest of 0% APR will be insane after the introductory period. So when you say goodbye to a particular loan, you have a time to pay off the balance in transfer account in the right time.
#5 Carry on in an emergency
A 0% APR credit card is ideal to cover a sudden financial need. You might face some situations that you haven’t prepared a fund for it, so all you want is to have a card that is with a high limit enough to spend right away, but the rate also is too low for you to pay off as quick as possible when this particular issue overcomes. So if not really necessary, save your 0% APR credit card for special occasions.
So let’s improve your credit score, call to card issuers for a new 0% APR credit card.