Pocket Change Blog

Interest Free Credit Cards Can Help Manage Debt

April 30th, 2011

By: Article Marketing Automation

It has to be said that most of us would be a little dubious about taking on any form of interest free credit. Why on earth would any company lend you money for free - there must be something hidden in the small print that contains a charge for this service surely? Being wary of offers that seem to good to be true is a healthy view but can actually cloud your opinion on a lot of good offers you could take advantage of.

An interest free period is a carefully calculated offer than will cost the company a little in the short term. The card issuer knows that many people open a card account based on a promotion such as this and will keep the card, including the balance they incur on it over time, for years and years. The interest free period is more than compensated for by the average term that a new customer will hold an active account. This type of offer depends upon it.

You will need to establish the term of the interest free rate, which could be 6 months to 18 - and whether it applies to balance transfers, new purchases or the two combined. If you make a cash withdrawal at a bank or ATM then expect this to attract interest from the start and at a high rate. Most cards do not include cash withdrawals in their interest free offers. In general, the longer the interest free period, the more likely it is that the final interest rate could be higher thereafter.

Used in the right way it could be very beneficial to apply for one of these interest free credit cards. For a purchase of some home furniture, flat screen TVs or other such items, this could work well you have 6, 9 or 12 months to repay the loan for your new acquisition. Go out in the sales and buy a bargain and get it interest free. The key here is a disciplined repayment schedule. Get any items you need and can afford in one lot and then cut the card up! Repay them at a set amount each month.

For those wanting a cheaper alternative to their current card, you have to think about two things. You will be charged a balance transfer fee of 2-4% and then after the interest free period you will go on to a new rate, which should ideally be lower than your current card rate. Take the cost of these two elements together to decide whether it is worth the effort. The longer the interest free credit period the better, obviously! Be aware that the amount you can transfer could have a cap set at 70-95% of your new card credit limit. This period will enable you to repay the same amount each month that you currently are paying and actually reduce your debt rather than just paying interest alone.

Finally, if you are very short of money at any time and have a reasonable credit rating you can still apply for a card of this type. You could use it as an emergency measure for food and bills until you can sort your finances out.

It is therefore possible to get a good deal from an interest free promotion providing you use them wisely. Set your limits for the use of the card at the outset, be disciplined and repay within the interest free period or as soon after as possible and you will have made a wise financial decision.

Article Courtesy of Article Network

Entry Filed under: Credit cards