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Which cards won't charge me interest?

November 8, 2013
Ask Erica
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QDear Erica,

I am a frequent Internet shopper and would like to have a credit or debit card with 0 percent APR and 0 percent shopping interest. Could I get this kind of card? – Khalid

AHi Khalid,

I also prefer to shop online. There are so many benefits, from the ability to instantly compare prices to not having to stand in long lines. Plastic is the payment form of choice, though, so it's important to get the best and use it well.Ask Erica

To avoid big balances where expensive interest charges are applied, you have a few options. The first is a debit card. Simply open a checking account at a bank or credit union, and they will issue you one. Most of these institutions partner with Visa or MasterCard, so you'll see their logo on the card, meaning that you can use them anywhere those companies are accepted (which is pretty much everywhere).

There is no interest rate attached to debit cards because you're not borrowing from the issuer. Instead, the money comes directly out of your checking account. When you're out of funds, that's it — you can't shop anymore. Unless you have overdraft protection, that is. If you've signed up for this type of protection, the negative sum will be withdrawn from a connected account (usually a savings account). There are fees associated with overdraft protection, however, so it's best to avoid relying on it. Keep an eagle eye on your account and stop hitting “buy” when you're near the end. You may also be able to set up an alert with your bank, which will send you an email or text when you're scraping the bottom of your available cash. The downside to using a debit card versus a credit card is fewer purchase protections.

Another option is a prepaid card. Prepaid cards allow you to load money onto a card, which then functions just like a debit card. You'll have to pay to load the funds, however. Again, because you're not borrowing money, you won't be charged interest on purchases you make with a prepaid card.

Many experts believe that you should avoid using debit and prepaid cards online because they're linked to actual money. If fraud occurs, a thief could drain your account and you could be short of funds for the day or two that it takes the bank to resolve the matter. Still, I do use my debit card online sometimes, so I won't say never.

So let's move on to credit cards. A credit card allows you to borrow, but you don't have to pay for everything you spend all at once. The issuer will send you a bill, asking for a minimum amount that's based on the balance. You'll have to pay interest on any balance that's left over.

Is there such a thing as an interest-free credit card? Yes and no. Issuers won't assess any finance charges at all if you pay in full by the due date.

And yes, some issuers do offer promotional 0 percent APRs. With these offers, no interest will be applied to any balances you run up for a certain length of time (most of these deals last six months to a little over a year). But eventually the rate will right itself, and the APR will then jump to whatever it states in the original agreement. So you have to be careful. Yes, by all means, take advantage of the interest-free period if you can get a 0 percent card. But make sure you can pay off your balance in full before it ends. Otherwise, you will owe interest.

You can find out which cards are offering 0 percent APR (and for how long) here. Highlight the accounts that appeal to you the most. Keep in mind that these cards require excellent credit for approval. Therefore, you'd need credit scores that are at least in the mid-700s. If your scores are there, great. Apply for the card that you qualify for and that has the most attractive terms.

After obtaining the card, be sure to make all your minimum payments on time. Late payments can trigger an abrupt and early end to the special rate.

Happy (Internet) shopping!

Got a question for Erica? Send her an email.




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