Using 0% Credit Cards to Reduce Your Debt

Credit cards are both a blessing and a curse. They're great if you have an emergency come up that you need to deal with immediately. However, they're also a curse, since you can accumulate oppressive levels of debt by not controlling your spending. When you use plastic, you don't have any limit on how much you spend. If you don't have much in the way of self-control, you can very quickly find yourself in a very difficult situation.

Credit cards are just like getting an instant loan. Each time you use a credit card, in essence you borrow the exact amount that you're charging to your card, and you promise to start making payments on that debt as soon as the first statement arrives. Unfortunately, for some people, that's when the nightmare begins.

You don't pay the full amount on the statement, intending to pay it off in the next few months. However, you continue to buy things using your credit card and spend indiscriminately, and that balance continues to grow. Before long, the amount being charged in interest becomes almost as much as the amount you spent on "stuff".

However, getting a 0% APR credit card can actually help you reduce the amount of debt you're carrying. Originally a marketing gimmick, zero interest cards have become a regular feature offered by some credit card companies. Zero APR means that the credit card company isn't charging you any interest, with APR meaning Annual Percentage Rate.

Zero rate cards can be a blessing, but only if you use them properly. If you continue to spend freely, then it won't be of benefit to you. However, if you eliminate unnecessary spending, you can take advantage of the zero percent feature to cut your outstanding debt quickly.

If you currently have a $12,000 credit card debt, and you have an APR of 20%, then you're paying $200 each month ($2400 each year) in interest payments. That means, the first $200 you pay each month doesn't go towards reducing the debt, it merely pays that month's interest charge. Switching your existing credit card debt to a 0% APR card will mean that that $200 will going to reduce that existing debt.

Unfortunately, these cards only provide the zero rate for a short period of time. Called an introductory rate, the special low rate applies for as little as ninety days. When the special rate expires, the new rate will be higher, and may end up being much higher than you had been paying on your previous card.

You need to get a card with the longest zero rate that you can get. The longer you can avoid having to pay interest, the greater the reduction in your outstanding debt. Before the introductory period is over, make sure to start looking for another card offering a zero rate, so you don't end up getting hit with those higher interest costs.

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