Does 0% interest mean hero or zero?

With one major credit card company having just announced the first-ever balance transfer credit card deal to last for two years, consumers are being given an even greater incentive to potentially max out their credit cards in the knowledge they can continue delaying having to pay for it a while longer.

Of course, minimum monthly repayments still have to be made, but it is likely that several other credit card companies will respond with equally eye-catching promotional rates.

Putting off having to pay off a credit card bill, of course, can only ever be a temporary measure as eventually youíll have to stump up the cash. Being a ëcredit card tartí ñ switching cards whenever a deal is about to end, and transferring the balance to another 0% deal ñ is often a dangerous game to play and one that needs you to be on top of your finances.

The reasons why people do transfer their balances to a zero percent card are clear. The obvious one is that you are not obliged to pay off any interest on the balance on your card, as long as you remember to pay off the minimum monthly payment required.  It means you only pay for what you are buying ñ it just means that youíre putting it off until you feel you are able to.

It can also help you if you need to splash out on something large – like white goods for your home, or a holiday ñ and pay off the balance at your own speed, without having to take out a potentially more expensive in-store ëstaggered paymentsí package.

However, it is always worth bearing in mind that you need to be careful before leaping on the most eye-catching, market-leading promotional rates on offer.

Nothing lasts forever

All good deals have to come to an end, and all credit card bills have to be paid off at some point. If you have a zero percent deal, you also always need to be aware of the cardís expiry date, and also the date of the monthly minimum payment. It is not hard to see how easy it is to miss one, and then you risk losing the advantage of the promotional rate.

It is arguably part of the reason why companies provide these offers. Some cards shoot up to an interest rate much higher than that of a a standard card if the balance is not paid off by the time the promotional rate is over, while some ëcompoundí the interest if the balance is above zero.

Think about alternatives

It might be worth thinking about ditching the temptation of 0% cards and thinking laterally. A long-term but low-rate credit card would remove the need to apply every year for a new card, which could be harming your credit rating. In addition, if you have several cards that need paying off, then it is vital to ensure the one with the highest interest are paid off first.

Leaving footprints

Applying for a credit card ñ any credit card ñ leaves a ëfootprintí on your credit report that other lenders can see. As a result, too many attempts to get credit in a short space of time could potentially have repercussions for the state of your credit rating. Lenders may surmise that, given that youíve made several applications for credit, you are likely to be financially overstretched and a potential risk.

Checking your credit report is therefore a good idea if youíre considering applying for a 0% deal ñ or if youíve just been refused one. With lendersí appetite for risk not perhaps what it was, the criteria for being accepted for the most favourable deals have tightened, and as a consequence you may need to have a credit history with as few blemishes as possible.

The best way to do that is to check your credit report, which will show if you have any late payments or defaults, and ensure that it is accurate and up to date. Itís free to see your Experian credit report with a 30-day trial of CreditExpert ñ and you can order your Experian Credit Score at the same time.

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