This guest post was written by Jason Bushey. Jason is a full-time personal finance blogger and he runs the day to day operations at Creditnet.com.
The 0% intro period on a credit card is simply the greatest time to be a cardholder. It’s your new credit card’s time to shine; no interest fees, bonus incentives aplenty and maybe even some late payment forgiveness.
But did you know that the most savvy credit card users never pay interest? Like, not ever. And how exactly do these sly devils do it?
Well, there are a couple of ways to pay 0% interest on a credit card for as long as you own it. One way is fairly obvious, but other way might be new to you. That said, they’ll both save you hundreds or even thousands of dollars in interest fees when implemented correctly.
The first way you can skip interest fees for good is to transfer your credit card balance.
1. Balance transfer credit cards
If you’re unfamiliar with 0% interest balance transfer credit cards, here’s the quickie explanation on how they work: apply for a credit card with a zero percent intro period that applies to balance transfers, then take the existing balance on your old credit card and simply move it over to your new, zero interest credit card. That’s pretty much it!
That said, there are some specifics to consider when transferring your balance. For example, you generally have to have average-to-good credit or above to apply for such a card. So, if your credit is fair or bad, this might not be an available option to pay down your debt.
Next, you’ll want to apply for a credit card with an intro period that will allow you to pay back the entirety of your credit debt. The more debt you have, the longer the intro period you’ll want out of your new zero interest card. Generally, intro periods last anywhere from 6-to-18 months, so make sure you choose the credit card with an intro period that’s right for you.
Finally, once you’ve got your new zero interest card, don’t hesitate to initiate that transfer. Some credit cards require that you transfer your balance in the first month or two of opening the account for that zero interest period to apply, and remember that it generally costs 3% of the total balance being transferred. That’s a small price to pay for saving on interest, and why wait another billing cycle to pay interest on your credit card balance?
Initiate your transfer immediately to take advantage of your new credit card’s introductory period.
2. Pay your balance back in full each month
OK, the easiest and most obvious way to never pay credit card interest is of course easier said than done; pay your balance back in full each and every month.
You’ll never pay interest on a credit card balance if you have no balance. Not to get all 6th grade math teacher on you, but anything times zero equals just that: zero. So whether you own a credit card with 10%, 20% or even 30% interest, it really doesn’t matter if you NEVER carry a balance.
There’s an old credit card myth that it actually helps your credit score if you carry a balance. This isn’t really true, especially if your credit card balance is on the high side.
According to FICO inventors Fair Isaac, a third of your credit score is determined by the amounts you owe relative to your total credit line. It’s ideal to owe less than 10% of your total credit line, but it’s extremely important to owe less than 30% to maintain a strong credit score.
So if a balance transfer is out of the question but your poor credit score is costing you a fortune in interest fees, your next best option is to make paying down your balance a number one priority. Odds are you’re paying more interest on your credit card than anything else; do yourself a favor – and your wallet – a favor and lower that credit card balance as quickly as you can.
OK, so while there’s no magic trick to paying zero interest on your credit cards, the most simple thing you can do is to make paying back credit debt the most important priority when it comes to your personal finances. Whether this means making a balance transfer or coming up with a payment plan to pay down credit debt is up to you.
No matter what route you choose, remember that the lower the credit debt, the lower the interest. And zero balance equals – you guessed it – zero interest.