What is a Zero Percent Credit Card?

What exactly is a zero percent credit card? Does it mean you do not ever have to pay interest on your balance? (The answer is NO!) Though not yet a very common offer in India, zero percent credit cards are available and could be a useful way of consolidating your credit card debt.  Credit card interest rates are among the highest consumer interest rates. While a zero percent card might sound attractive, there is a big red flag that accompanies it – the most important one being that the zero percent interest feature is for a limited period only – typically for a few months. After the expiry of this period, you will need to pay regular interest charges. You need to be aware of the restrictions and limitations of these kinds of cards so that you do not spiral further into credit card debt.

A few banks in India offer zero percent credit cards on your balance transfer. In effect, when you move your balance from one card to this zero percent card, the bank will charge nil interest on your balance for an introductory period. For instance, if you opt for an SBI zero percent card, you will not be charged interest on your balance for 60 days, though you will need to pay a processing fee. Alternatively, you could choose to pay a nominal interest rate of 1.7% per month for a period of 180 days without paying any processing fee. (The processing fee could be a percentage of your balance or a flat fee, whichever is higher.) Other banks, including Kotak Mahindra and Axis Bank, also offer zero per cent interest cards so it is a good idea to see which card offer best suits your requirements.

While these cards are promoted as 0 % credit cards, always remember that it is a limited period offer. After the promotional period is up, you will be charged interest on your outstanding, which in some cases might even be higher than the normal rate.  

Eligibility for Zero Percent Credit Card

Generally, credit card issuers are strict while issuing these cards, and applicants need to match the eligibility criteria to able to own one of these cards. The applicant needs to be at least 21 years of age at the time of application and be able to demonstrate a credit history. The applicant’s employment history is also taken into consideration.

Additional Reading: How Is Credit Card Interest Calculated

How do Zero Percent Credit Card Work?

Credit card issuers tend to offer these cards in order to attract new customers while, on the other hand, consumers take advantage of these cards to get a little breathing time on their interest payments. Since credit card interest rates are so high, having even a couple of months of no-interest payments on your balance can help you begin to settle your credit card finances and pay back your outstanding.

While a zero percent credit card is a great product to give you a little buffer when trying to pay off your debt, you must keep in mind that it is only a temporary respite. Explore your various options, but utilize the nil interest period to pay off your credit card debt.