If you have good or excellent credit, you may qualify for a credit card offer with an introductory 0 percent APR.
Then, when you’re approved, you can charge holiday gifts to the card without paying any interest during the introductory period, which could range anywhere between six months to as long as 24 months.
That’s a fantastic deal — but only if you know enough to avoid common pitfalls that could turn your smart shopping plan into a regrettable mistake.
Before you charge holiday gifts to a 0 percent APR credit card, check out these five tips on how much you can save and a few missteps that could throw your repayment plan off course.
You can save hundreds of dollars on interest
Interest rates on traditional credit cards range between 13.99 to 23.99 percent. All of that interest will cost you over time, making your holiday shopping that much more expensive.
Using a card with a 0 percent introductory APR instead can save you a lot of money as long as you pay more than the minimum, make the payments on time, and pay off the balance before the 0 percent APR offer expires.
If you pay off a $1,500 balance on a 0 percent APR credit card before the offer ends, you won’t pay a penny in interest. On the other hand, that same $1,500 balance on a credit card with a 19.99 percent interest rate would accrue interest the entire time you carry a balance.
You can easily find out how much interest you could save (or pay) by inputting some figures into a credit card interest calculator. For example, if you make only the minimum payment of $45 ( three percent) on a $1,500 balance, you’ll pay more than $1,200 in interest over more than seven years it would take you to pay off the balance.
Find out: Holiday Credit Card Tips to Help Keep You Out of Debt
Paying late may cancel the 0 percent APR
With most introductory 0 percent APR offers, a late payment may cancel out the 0 percent APR, replacing it with a much higher interest rate. Make sure that you always pay by the payment due date on a card with a 0 percent APR offer. Even paying only a few days late could cancel that money-saving APR.
If you do pay late, call the credit card issuer and ask the agent if they can let you slide just this once. They may give you a break if it’s a one-time issue.
Retailers may add retroactive interest
Some late payments are worse than others. Some lenders may put in their terms and conditions that late payments will not only cancel the zero APR deal, but also require you to pay retroactive interest from previous purchases.
Adding retroactive interest charges as a penalty for paying late is common with certain retail credit cards that offer APR deals on large purchases. If you pay late, call the credit card issuer immediately and ask if they can waive the retroactive interest rule just this once.
Find out: Avoid the Holiday Spending Hangover
Read the terms and conditions carefully
Before you apply for a 0 percent APR credit card, read the terms and conditions of the card and the offer carefully. Look for how long the introductory period will last and the interest rate that will apply after the intro period ends. Also, find out what happens if you miss a payment or pay late.
Avoid paying only the minimum payment
It may be tempting to pay only the minimum payment with plans to increase that amount later. However, the minimum payment listed on your credit card statement is designed to work in the credit card issuer’s favor.
So, if all you pay is the minimum payment each month, you’ll have a remaining balance when the introductory period ends — and you’ll pay the price with all the interest you’ll pay until that balance is paid off.
Find out: How to Make a Holiday Budget
Create a debt repayment plan
An introductory 0 percent APR gives you a lot of breathing room while you pay down your balance, especially if the intro period runs for 18 or 24 months. But don’t get too comfortable making only small payments with a larger payment here and there.
Instead, create a debt repayment plan, using a credit card interest calculator to make sure your balance is paid off by the time the 0 percent intro period ends.
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This article originally appeared on Debt.com and was syndicated by MediaFeed.org.
In debt after the holidays? These 8 tips can help
While the holidays are an exciting time, they often come with a hefty price tag. If you’ve overspent on gifts, travel, parties and other things during the holidays, you’re not alone. Consumers expect to spend more than an average of $1,000 during the 2019 holiday season, according to a survey from the National Retail Federation.
If you’re in debt after the holidays, these eight tips can help you pay it off and improve your financial situation for 2020.
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If your goal is to save the most money on interest over time, you should go with the debt avalanche strategy and pay off your high-interest holiday debt first. If you think you’ll have trouble staying motivated, opt for the snowball approach instead.
With the snowball approach, you pay off your smallest debt first, then apply the payments that you were previously using toward it to pay the next smallest debt. Keep doing this until all your holiday debt is gone.
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One of the easiest ways to get out of holiday debt as soon as possible is to say no to luxuries like morning Starbucks runs, manicures and random Amazon purchases. Use the money you save on luxuries to pay off your holiday debt. Remind yourself that this is temporary. Once your holiday debt is paid off, you can enjoy these luxuries once again.
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Pick up a side gig so you can earn extra cash and pay off holiday debt without making drastic changes to your lifestyle. You can babysit, drive for Uber or Lyft, deliver food for DoorDash or Instacart, or sell unwanted items on Facebook Marketplace, Craigslist or LetGo. The options are endless so get creative — here are some tips.
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Find a balance transfer card with a 0% introductory annual percentage rate. This way you can pay down your holiday debt while paying no interest for a set period of time. You’ll find that there are many great offers in January because credit card companies know that a lot of consumers have overspent during the holiday season.
Here are some common myths you shouldn’t believe about balance-transfer cards.
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You may have received gift cards you don’t have any intention of using. If this is the case, sell them to people you know or strangers in your neighborhood for cash. You can also use an online marketplace like Raise.com or Cardpool.com. While you may get less than their face value, you can put the cash you earn toward your holiday debt.
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It’s all too easy to swipe your credit card any time you want to buy something. While you’re trying to get out of holiday debt, get into the habit of using cash. Using paper money might make you more conscious of your spending and help you stick to a budget. Sticking to cash can help you avoid digging yourself further into debt and exacerbating the problem.
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While it may be tempting to use your January bonus, birthday cash or tax refund on a new mattress, car or something else you’ve been wanting, putting it toward your holiday debt is a smart move. The sooner you get out of holiday debt, the sooner you’ll be able to save up enough money for your splurge.
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Once you pay off your holiday debt, take the money you were using to pay it down and place it in a savings account. You can use the savings account for the next holiday season and avoid getting into debt again. Remember, it’s easier to avoid debt than it is to get out of it.
Stay out of debt all year long with this budgeting spreadsheet.
This article originally appeared in Policygenius and was syndicated by MediaFeed.org.
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Featured Image Credit: svetikd.
