Zero-Interest Credit Cards: The Ultimate Financial Hack or Financial Grenade?

Zero-interest credit cards may be tempting to some individuals who can’t quite make the full payment on their statement in any given month. Undoubtedly, those who put things on credit with the intent to worry about matters in the future may find them to be a pretty nice “financial hack” of sorts.

That said, I’d argue that there are drawbacks of promotional low-rate periods. On the surface, a “0% APR” looks fantastic. But what happens once the promo rate expires? The odds are that you’ll be paying interest on outstanding balances that’re in the ballpark, along with most other credit cards out there. And, as you’re probably aware by now, such rates are high, really high.

Of course, such zero-rate promotions can work for consumers who are running into near-term cash flow issues. Indeed, for someone who expects to be on better financial footing in a few months down the road, saving in interest payments can make the zero-rate cards more than worth the while. In any case, for most folks, I’d opt for a card that has the best sustained perks and benefits, rather than leaning too heavily on promotions.

Zero-rate cards sound great on paper. But prospective applicants should think beyond the promo period.

At the end of the day, it is possible to have one too many credit cards. More applications could weigh heavily on your credit score. And with more cards to manage, the odds of missing or forgetting a payment are that much higher. Of course, promotional balance transfers and all the sort can help improve upon management of credit card debts.

As always, whether zero-rate cards are a “financial hack” or “grenade” depends on who you are, your financial situation, and what you plan to do with them. For responsible users who will be able to manage the debts as they eventually come due, zero-rate cards can make sense, provided you intend to change your spending patterns once higher rates come online.

For irresponsible users who will be enticed to spend more and let the credit card debts sit until the promotional zero-interest rate expires, such a card can really hurt your credit score where it hurts. Additionally, you’ll need to read the fine print.

There are ways to score better, sustained returns from a credit card

Undoubtedly, credit cards with temporary periods of zero rates may not have the best permanent perks and benefits. For those who tend to pay all (or at least most) of their credit card balances every month, perhaps it’s better to opt for the promos that entail a generous amount of points or cash back.

Undoubtedly, you should crunch the numbers to find out which card will allow you to score the biggest return on the money you’d spend in any given year. Some cards are a better fit for travellers, while others are better for families with high weekly grocery bills. And, of course, there are Millennial-themed cards that grant the most perks and points for experiences and fine dining.

The best way to know which card is a better fit for you is to evaluate the list of benefits and the likely return you’d get based on your own personal spending habits. As enticing as zero-rate promos are, they don’t last long. It will not take long before that zero-rate card turns into a normal card, one you may not think is as worth the while any longer.