Holiday Shopping Strategies: Taking Advantage of Low APR Offers
December 10, 2018
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The holidays are here, which means ‘tis the season for gift shopping, which can get expensive. In fact, a Gallup poll found that Americans plan to spend approximately $800 on gifts this year. But, because many people don’t have that much in savings, they’ll turn to credit cards, instead. That could mean they’ll be making payments — and paying interest — for months.
However, there are strategies you can use to minimize your credit card debt and the interest you’ll owe. One of the best ones is to take advantage of credit cards that offer low APRs for a promotional period. Below, find out how this strategy works and how it can help you save money.
Using a low-APR card for holiday spending
If you have good credit, credit card companies compete for your business. That means offering different rewards and benefits, but it also means you can score a low APR.
Some companies offer APRs as low as 0% on new purchases for a set promotional period. That means you can make your purchases and pay no interest for months. Some even allow you to have up to 15 months before you have to pay interest.
How much you can save
Using a zero-interest credit card for your purchases can help you save a significant amount of money when compared to using a credit card at its normal APR.
For example, let’s say you charged $800 worth of gifts to a credit card with an APR of 17%, a typical interest rate. If you only made the minimum payments, you would pay over $685 in interest, and it’d take you over eight years to pay off your debt.
But let’s say you used a zero-interest credit card instead. If you paid $70 a month toward your debt, you’d pay off the balance within 12 months. And, no interest will have accrued. Just taking a few minutes to apply for a zero-interest card would help you save nearly $700.
While taking advantage of a zero-interest promotional period can be a smart strategy, there are some drawbacks to consider. Namely, you have to be focused and disciplined to pay off the balance within the promotional period — usually 12 to 15 months — or the regular APR will kick in, costing you money.
Before deciding to use this approach, make sure you come up with a budget and a repayment strategy so you can effectively manage your debt.
How to get a zero-interest credit card
If you have good to excellent credit, it’s easy to find a credit card that offers a zero-interest promotional period. Here are three of our favorites:
1. Discover it® Cash Back
With the Discover it® Cash Back card, you can enjoy 0% APR for 14 months, with a go-to APR of 14.24% - 25.24% Variable, giving you plenty of time to pay off your purchases. Better yet, there’s no annual fee and you can earn up to 5% cash back at different places each quarter like gas stations, grocery stores, restaurants, Amazon.com and more up to the quarterly maximum, each time you activate.
2. Wells Fargo Propel American Express® Card
With the Wells Fargo Propel American Express® Card, you can have up to 12 months to pay off your purchases with 0% Intro APR for 12 months on purchases and balance transfers (fees apply), then a 14.74%-27.24% variable APR; balance transfers made within 120 days qualify for the intro rate and fee. And, you can get a 30,000-point signup bonus, a $300 cash value. With the card, you can earn 3X points for eating out, getting gas, and travel, too.
3. Capital One® Quicksilver® Cash Rewards Credit Card
The Capital One® Quicksilver® Cash Rewards Credit Card gives you 0% intro APR on purchases for 15 months; 15.24% - 25.24% (Variable) APR after that, the longest offer on our list. And, if you spend $500 within the first three months of opening the card, you’ll get a $150 cash bonus. If rewards are important to you, the card also allows you to earn 1.5% on all purchases, every day.
Financing the holidays
No doubt, the holidays can be expensive, and it sometimes takes creative strategies to make it more affordable for you and your family. By using a credit card with a zero-interest offer, you can minimize the impact of holiday spending on your budget, and pay it off quickly without owing hundreds in interest.