By Lynnette Khalfani-Cox, The Money Coach®
I remember back in 2001 when I had a ton of debt; I’m talking $100,000 in credit card bills alone. I know it sounds awful, and it was. However, in my late 20s and early 30s, I was a classic over-spender who’d been mismanaging credit even though I didn’t realize it.
In fact, I was in denial about my debt and credit woes for several reasons.
For starters, I had a good job with a nice, six-figure income. Secondly, I never, ever missed any payments, so bill collectors were not calling me at work or home nor was I dinged with late payment fees or high interest rates. Finally, I was doing a lot of other things right: investing in mutual funds, socking away money in my 401(k) plan and protecting my family by having life insurance and disability coverage.
All these things helped me to rationalize my debt issues and made me think I was doing just fine. Until, of course, I wasn’t.
One day, after maxing out my cards and denied new credit card offers I finally decided to take a cold, hard look at my debts and tally up all my bills. After I listed everything in black and white, I’ll admit it was more than a little unnerving to realize I’d amassed just more than $100,000 in credit card debt.
Fortunately, I didn’t panic. I simply resolved to start chipping away at my credit card debt, little by little. It took me three years to become debt free, and I’m proud to say that I paid back every penny that I owed, without ever missing a single payment.
In 2004, I wound up writing a book about what I did to knock out my debts. That book, Zero Debt: The Ultimate Guide to Financial Freedom became a New York Times bestseller. It’s sold more than 100,000 copies and is currently in its third edition.
To help pay off my debts, one of the smartest things I did was to start shopping around for the best 0% APR credit card deals available. I knew that if I could knock my interest rates down dramatically, I would substantially lower the finance charges I’d been paying, and that money could go toward reducing the principal balances on my credit cards.
So I went on the prowl for credit card offers with a 0% introductory APR. Honestly, back then, doing a balance transfer with a 0% intro rate was often the only way to afford all my payments because I was mostly making minimum payments. But because I had an excellent payment history, I was eventually able to get several credit card offers at 0% and to negotiate with my creditors, knocking down my other credit cards to between 2.9% and 4.9%.
These days, if I take advantage of a 0% credit card offer, it’s not because I’m struggling to make minimum payments. It’s because I’m using my credit cards strategically in some way that will help not hurt my overall finances.
Besides learning the art of delayed gratification, and not spending money on things I couldn’t really afford, my past experience taught me three important lessons:
- In a competitive marketplace banks, credit unions and other credit card issuers will always compete for your business in order to keep you as a customer or attract you as a new client. So it pays to shop around and always know the latest offers available.
- You have a lot more power than you think when it comes to negotiating with financial services firms and getting better deals.
- A 0% credit card deal can be advantageous to lots of people, even those who aren’t deep in debt.
How You Can Benefit From a 0% Credit Card Deal
You should seriously consider taking a 0% APR deal if you fit into any of these categories:
- You have existing credit card debt that you are currently unable or unwilling to repay in full.
- Your current interest rates are average to high: 14% to 24% APR or more.
- You are planning to make a large purchase on a credit card (or have recently done so) and need some time to pay it off.
- You want to get aggressive about paying off credit card bills and have your future payments go toward the principal, not interest.
- You want to manage your monthly cash flow and having a 0% offer would help.
- You have a good enough credit score to lock in a competitive 0% introductory rate for near-term or future flexibility.
If any of the scenarios above describe you, the right credit card could give you a year or more worth of payments completely interest free.
Even if you ultimately decide not to take advantage of a new 0% APR credit card deal, such an offer can still benefit you. How? You can use it as leverage to negotiate with your existing creditors, just like I did. There’s nothing to stop you from calling up your current credit card company and saying something like: “I received a lower rate credit card offer from your competitor, XYZ organization. Can you match or beat this offer?” Even if they say no, you’re no worse off for asking. But chances are, you’ll probably get a sweeter deal. A survey from Synergistics Research Corp. revealed that more than 75% of customers who call their credit card companies to request a lower interest rate get a better deal right there on the spot.
A Word of Caution
Keep in mind that 0% offers last for only a set time, so if you don’t pay off what you borrow, you’ll pay the established annual percentage rate on your remaining balance that will likely be much higher. You may also be required to pay balance transfer fees, so you need to read the fine print if you are consolidating debt. Finally, if you’re late with payments, the lender may end this introductory 0% offer.
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