5 tips for handling 0 percent credit card offers

By Julie Bawden-Davis

When a credit card company says they'll give me free credit for 12 months, I consider paying off my balance before the end of the period -- and avoiding the interest charges that will appear if I don't -- a challenge.

My romance with these offers started several years ago when the receptionist for my son's orthodontist flashed me a toothy grin and handed me the bill for his braces. I gulped at the total and decided to apply for a card that offered a zero-interest period to help handle the expenses. I paid that balance off before the end of the period, and I've since financed several dental and veterinary bills the same way.

But before you opt to use a 0 percent offer to pay down your bills, here are five tips to keep in mind.

1. Read the fine print

Before you apply for a new card, make sure that's exactly what you're getting. With a 0 percent offer, the promotion expiration is the date by which you must pay off your balance or else the remaining amount will be subject to the standard APR from that point forward -- usually between 12 and 24 percent. Also note that these cards still typically require a monthly minimum payment during the 0 percent period. If you fail to make that payment in time, you may pay a hefty late fee and even forfeit your 0 percent status.

2. Calculate your payments

To take full advantage of a 0 percent card, it's helpful to calculate how much you will need to pay each month to pay off your balance before the interest charges return. For instance, if you spend $1,000 and you get a six-month 0 percent deal, you would need to pay about $166 each month to avoid paying interest. Thinking you'll magically have $1,000 when the promotion period ends is bad budgeting and can often result in you returning to the world of paying interest, perhaps scarcely better off than you were before.

3. Avoid overextending

While a 0 percent card can help you pay for expenses that you might not otherwise be able to afford, you will pay more money if you fail to pay your balance off in time. Just because the credit card issuer is willing to offer you $4,000 for nine months doesn't mean you should use all of that credit at once -- unless you have in your budget $444 to make a payment each month.

4. Shop around

Not all 0 percent cards are created equal. Look for a card that gives you the longest promotional period possible, which can help you spread out the costs. For instance, $1,400 will cost you just $58 per month over 24 months, compared to $116 over 12 months and $233 over six months.

5. Watch those fees

If you'll be using a 0 percent card to make a balance transfer, be aware that there are generally fees involved, which typically amount to 3-5 percent of the amount transferred. Before you transfer a large amount of money, make certain you do the math on fees or you could negate your reason for making the transfer in the first place.

Used responsibly, a zero-interest credit card can be a great way to avoid interest payments and improve your financial standing. Rising to the challenge of paying off your balance in a timely manner can offer a nice feeling of satisfaction too.