If you just got an offer for a credit card with 0% APR, you might have been tempted to send in the form already filled out and signed. You may have seen the words "0% interest" and jumped at the chance to shop without worrying about paying for it for six months. You might have even thought that this was the answer to all your credit card or bank loan debt, letting you combine all your bills into one low payment with no interest. All of these things could be true, too. But there are some very bad things that could happen if you just start spending with your new card without thinking.
Short introductory period: Credit card companies that offer 0 APR cards can't give you this deal for very long, or else they wouldn't make any money off of you. So, most deals last for six, nine, or even a whole year. This means that you won't have to pay any interest on the loan for the first few months.
High interest rate: After the introductory period is over, your new credit card's interest rate is often higher than the average rate. Most of the time, the interest rate is between 19 and 21%, and it could be higher for cash advances and other transactions.
Penalty for late payments: During the introductory period, if you pay your bill late or forget to pay it at all, your interest rate will go up right away to a penalty rate. This could be as much as twenty to twenty-four percent of your total balance.
The 0% APR can only be used in certain ways. Some cards offer 0% interest on all purchases and balance transfers made during the introductory period. Read the fine print, though, because some credit cards only offer 0% APR on balance transfers and a high rate on purchases.
Tricky conversion period: When you move from 0 APR to your regular interest rate, you may be charged interest on any purchases you didn't pay off during the introductory period if you haven't paid off the balance in full.