For example Wells Fargo has 0% interest for 21 months. I'm thinking about finding a card with 0% interest that will accept me and using it to fund a trip and then paying it off before the 21 months end.
However I'm worried there's a catch to these cards. Is it just them trying to get me to come to their card? Or is there some sneaky way they're profiting off of this?
Is there any catch to 0% credit cards for X months?
byu/joshua0005 inpersonalfinance
Posted by joshua0005
18 Comments
Just pay the minimum each month and have a 0 balance at the end.
If its a balance transfer offer, there’s usually a % fee based on the amount transferred.
Also depending on the fine print if you have *ANY* remaining balance when the time comes you may be faced with *ALL* the interest in short order.
The catch is they profit if you miss payments or carry a balance after promo ends. Some also charge balance transfer fees. If you’re disciplined, 0% APR can genuinely be useful.
No catch, just trying to get you to get their card. They profit it off it because every time you use it, they get a CC fee from the vendor. But, i’d read the fine print to be safe.
I’d also go to r/creditcards there might be a better one.
Just make sure you’re making the minimum payments and pay it all off before the promo period expires.
There’s no trick but real life happens and ppl either forget or they might have something else in their life that prevents them from paying it off on time.
Trying to get you to come to the card, and the majority of people (~70-80%) don’t pay them back in time. A lot of them have deferred interest penalty if you have any balance too, so you’d owe interest on the full amount even if you only had $1 left at end you failed to pay off in time.
Do you not have the cash to pay for the trip?
In the vast majority of the cases, the 0% offer applies to balance transfers. Not new purchases. So verify that.
They do it because 80%+ of people don’t pay the balance. They charge more and more because it’s easy and cheap. And then, 2 years later, they find themselves with a huge balance and the bank makes lots of money.
Less common with credit cards, but common with these “0% Interest” offers when making purchases (you’ll see them offered by furniture stores, electronics, etc that extend a line-of-credit when making a major purchase) is that they are actually accruing interest the entire 21-month time. And if the balance isn’t FULLY paid by the end of that “interest free” term, they will slap you with ALL the accrued interest from the past 2 years all at once.
They keep track of the interest you’re not paying just in case. If you miss or are late with a payment or if you don’t have the balance completely paid off by the end of the promo period, the promo ends and you will get hit with all of the back interest. That’s back to the beginning of the promo period, so depending on the initial balance that penalty can be significant.
0% intro APR offers are often to get you into the card and used to using it – the bank profits from every purchase you make, and when the intro period is over, if you built up poor habits and don’t pay it off every month, now they are going to make a lot more money off of you. The “catch” is the same with all credit cards, you need to use them responsibly or they can spiral into an emergency very quickly. 0% intro can be super useful if you have a big purchase you can already afford though, as you can hang onto your money for longer and pay it down over that promo period.
Others have mentioned the “catch”, but I think they’re useful for certain situations.
I found one with a hefty welcome bonus and used it buy my wife’s engagement ring. I had the cash, but kept it in a HYSA as a “sinking fund” and earned a bit of dividend from it. I was able to get the welcome bonus and a bunch of addition points too (1.5x multiplier). Just make sure to make the minimum payment and pay the whole thing off before the 0% interest ends.
I typically do that with huge purchases. I did it when I went to Italy, paid it back and there was no catch. They even offered me another deal like that right after.
They are hoping that you will charge up the card while it is interest free and be unable to pay it off once the promotional period ends.
In that respect, don’t ever spend money on a card if you don’t have the money in your account to pay it off at any time, and always pay off the entire statement balance in full by the due date, even if you don’t technically have to. Getting yourself into unnecesary debt is not a habit you want to develop, especially not at credit card interest rates.
No catch but you still have to make minimum payments and pay it all off before promo period ends. The card companies are absolutely profiting, but it’s not by being sneaky – it’s simply that a lot of people don’t pay off the balance in time. The zero interest period encourages people to spend money they don’t have.
No catch, I’ve had a couple the past few years. Had some large planned expenses and out them on the card while the money sat in an HYSA. Made a few hundred bucks on the interest and then paid it all off the month it was due.
You still need to pay the minimum payment every month but will be no interest to pay during promo period
If you get in the habit of carrying a balance, you’re going to be charged some hefty interest.
Sneaky way they make money: With cards they get a % of purchase every time you use them. This is not specifically to the 0% one, all cards do it
Some gotchas: review the offer terms. Some companies charge back interest in the whole amount if not paid before the promo period end.