Flower shop owner holding a credit card next to a laptop computer in her flower shop and smiling. Concept: zero interest credit cards
Jordan Schneir
By: jordan_shneir
Read in 12 minutes

How Do Zero Interest Credit Cards Work?

Have you ever received a phone call from a telemarketer offering you an all-expenses-paid trip to Hawaii? You like Hawaiian vacations. Who doesn’t! Even better, you like free Hawaiian vacations. But wait: it sounds too good to be true. What’s the catch?.  An offer to sign up for zero interest credit cards can seem like the equivalent of an all-expenses-paid tropical vacation. But is it?

As you know, credit cards are a great way to access much-needed funds for your business quickly and efficiently. But the often high-interest rates can negate the positives of using those credit cards by adding more expenses for your business. So zero interest credit cards seem like the best of both worlds—access to immediate funds without incurring extra expenses.

In fact, a credit card with a 0% Annual Percentage Rate could be a good idea for your business. So if you get an envelope in the mail offering you a 0% APR credit card, don’t throw it in the trash right away. Take the time to look at the details and think about whether it might be the right move for you.

What is a Zero Interest Credit Card?

Zero interest credit cards are exactly what they sound like: credit cards with zero interest.

But there’s usually a keyword associated with that 0% APR label: “introductory.” That means that the zero interest part of the deal is temporary; you can make purchases with the credit card with zero interest for a specific period of time.

The 0% interest period can last between six months and a year, sometimes longer. That’s why it’s important to always be aware of how long the 0% APR deal lasts for the particular credit card you’re considering because, after it’s over, high-interest rates can kick in immediately.

4 Reasons You Should Use a Zero Interest Credit Cards

If the terms and conditions of the credit card are favorable, there are good reasons to use a zero interest credit card or have one on hand.

1. Make large purchases interest-free
Especially if your business is new and just getting off the ground, you likely have those big-ticket items that you need to purchase. Whether you’re buying a storefront or a new truck or an industrial-sized refrigerator, those expensive expenditures can have hidden costs depending on the way in which you pay for them.
If you use a high-interest credit card to make those purchases, the interest rate added to the payments is going to mean a hefty price tag. But by using a 0% APR credit card, you can minimize costs for those have-to-have items.

2. Pay off high-interest credit card debt
If you’re interested in a zero interest credit card, it’s because you likely have some experience with the high-interest variety.
Many business owners accumulate unsustainable amounts of debt by using high-interest credit cards. But by using a 0% APR credit card, you can effectively pay off debt you’ve accumulated from your other credit cards. It can be an effective way to reduce your debt levels and put your business on a solid financial ground.

3. Pay off loans
In addition to credit card debt, you can also use a 0% APR card to pay off other kinds of loans. Whether you’ve taken out loans to rent an office or warehouse space for your company, or if you needed to borrow money to purchase equipment or to shore up your inventory, a zero interest credit card can be a logical means of reducing the money you owe back on those loans.
Through balance transfers, you can consolidate the loans you’ve taken out into a single account, which then you can pay down using your zero interest credit card. Needless to say, you have to make sure to pay off all your debts before the introductory 0% APR offer expires.

4. Use in case of emergency
Emergency situations can have a devastating impact on a business. A fire might destroy your storefront or a key piece of your equipment may suddenly break down. Whatever the case may be, to mitigate the effect of emergencies, you should have available funds to invest in the items your business needs to continue to operate. A 0% APR credit card can ensure that you won’t feel long-term negative impacts from these short-term spending needs.

The Downside of Zero Interest Credit Cards

While there are clear advantages if using zero interest credit cards, there’s some risk involved. After the initial introductory period, the interest rate often spikes to extremely high levels. If you can’t manage to pay off the card balance before then, your expenses could suddenly spike.

Even during the honeymoon period when the 0% APR is in full effect, there are still costs involved in using these credit cards. Many cards have specific fees attached to certain behaviors.

For instance, while balance transfers can be a great tactic to use to pay off loans, many interest-free credit cards charge between 2-5% for these kinds of transactions. In addition, your credit card might charge a late penalty if you can’t pay off the balance on time or if you use the cash advance option (that is when you use your credit card to withdraw cash from an ATM.)

Things to Look Up for Before Signing Up

Before you sign up for that zero interest credit card, here are the questions you need to ask:

  1. How long is the introductory period?
  2. How much will you be charged for missing a payment?
  3. What rewards programs are available to you?
  4. Are there any other hidden fees listed in the fine print?

Verify that you’re making an informed decision. If you do your due diligence and research the card before signing up for it, then you can guarantee that you will use the card most effectively without risking the long-term health and financial security of your business.

In addition, make sure you’re doing your market research to find the best credit card available. Here you can compare the 10 best business credit cards to find the one that’s right for you.

Why a Small Business Loan Might Be a Better Option

Despite its promises, a zero interest credit card might not be the right choice for your business. In that case, you should consider a business loan as a great alternative to finance your business needs.

While business loans have interest rates, they tend to be lower than many credit cards, between 1% to 2.25% on average. The repayment process is often flexible. You can negotiate terms with your loan provider to ensure that the agreement fits the schedule of your business.

Business loans can often be safer alternatives than credit cards and carry less risk. If you need a specific lump sum of money for a particular purchase, a loan can be a great option. If you’re looking to get funds without confusing terms and conditions and with the high certainty that you will be able to pay it off on time, a loan might be your best option.

It’s always important to consider all your options. Here you can compare credit cards and short-term business loans.

Camino Financial business loans have proven to be a better alternative to credit cards for many business owners because they can:

  • Complete the mobile-friendly application and enjoy a fast, easy and convenient process
  • Access funds as fast as in 4-10 days
  • Pre-qualify for the loan with no impact on credit score
  • Establish a credit history
  • Receive fixed interest rates and monthly payments (in terms that vary from 24 to 60 months) for more control over the repayment process
  • Graduate to a second loan after nine months of timely payments, for a bigger amount and with better terms and rates
  • Pay off the loan before the end of the loan term without penalty

If you are ready to know first hand all these benefits and more, apply for a business loan with Camino Financial and get the funds your business needs to grow.

Last words

In specific circumstances, a zero interest credit card or an all-expenses-paid trip to Hawaii can be a great idea. But if you don’t have the ability to pay off the balance or if you can’t afford the airfare to get you to Hawaii in the first place, then it’s probably not the right move.

By following our guidance, you can look into a 0% APR credit card and see if the terms and conditions meet your needs or whether you’d be taking on too great a risk. If you do wind up going the zero interest credit card route, make sure you’re using it properly: Read our do’s and don’t when using a credit card to guarantee the strength and integrity of your company’s finances.

For many business owners, a loan often makes more sense. Apply for a business loan with Camino Financial today.

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