What Are You Really Getting with 0% Interest Offers?

by Sara Weiser, Consumer Education Strategist, PSECU

money-256314_1920 (1)Paying nothing in interest sure seems appealing, especially now. If you’re fielding 0% credit card balance transfer offers or considering a 0% auto loan, be sure to dive deep into the particulars to make sure you don’t end up paying more in the long run.

Read on to learn tips for evaluating these offers.

Auto Loan Financing
When you’re shopping for a car, you have several options for financing. You can get preapproval from a financial institution, like PSECU, before you go to the dealer. Or, you can have the dealer search for financing offers for you. Some of the offers a dealer presents may include financing directly from auto manufacturers.

Financing offers from auto manufacturers can seem very competitive. Some require no down payment, offer 0% interest, or have cash rebates.

Evaluating 0% Financing from Auto Manufacturers
Financing from auto manufacturers often gives buyers a tough choice to make – you can get 0% financing or take a cash rebate and use financing of your choosing.

On the surface, it seems obvious that you’d want the 0% financing. However, depending on the size of the rebate, it may be better for you to choose your own financing from your preferred lender, like PSECU, and pair it with the cash rebate.

Consider the examples below for a car purchase that you need $25,000 for (both are 60-month loans). By taking the rebate and combining it with a PSECU loan, you’ll save more than if you take the 0% financing offer from the dealer – both in monthly payments and the total loan repayment amount.

The amounts below were calculated using our auto loan calculator. To get an idea of how much a car loan with PSECU might cost you, visit our vehicle calculators page and enter the amount you’re looking to finance and your desired term.

With a 0% Auto Manufacturer Loan             With a 3.49%1 PSECU Loan and the Rebate

Car price: $25,000                                    Car price: $25,00

Rebate: $0                                                  Rebate: $4,000

Amount you need to finance: $25,000      Amount you need to finance: $21,000

Interest rate: 0%                                            Interest rate: 3.49

Monthly payment: $416.67                          Monthly payment: $381.93

Total loan repayment: $25,000                   Total loan repayment: $22,915.80

Above example for informational purposes only. Actual terms will vary. See psecu.com/drive for important information.

Credit Card Balance Transfer Offers
Balance transfers on credit cards allow you to move the money you owe from one credit card to another. Typically, these offers are advantageous if the card you’re transferring the balance to has a lower interest rate than the card you’re moving the balance from.

By moving money to a credit card with a lower interest rate, your balance accrues less interest and your payments go further in paying off the actual principal balance on the card.

Evaluating 0% Credit Card Balance Transfer Offers
If you receive a 0% interest credit card balance transfer offer, make sure you read the fine print before jumping in. There are many more factors to consider, other than just the initial interest rate.

      • Length of offer – Most balance transfer offers expire after a set period of time (either a certain number of months or a specific date).
      • Regular interest rate – Once an initial balance transfer rate expires, the remaining balance typically is charged the regular interest rate of the card.
      • How much you can pay – If you can’t make more than the minimum payment on the card, you may still be left with a high balance after the balance transfer period expires, leaving you with a big chunk to pay down at the higher interest rate. If the regular interest rate on the new card is higher than the rate on the old card, you may end up losing money in the long run.
      • Fees – Many financial institutions offer attractive balance transfer interest rates, but they come with balance transfer fees. These fees may be a set dollar amount or a percentage of the balance you’re transferring and can diminish your savings even more (or make it nonexistent).

Balance Transfer Offers from PSECU
While our balance transfer offer may not seem as flashy on the surface, many of the factors above make a balance transfer offer from us a better deal for you.

Though rates are subject to change at any time, we currently offer balance transfer rates of 2.9%2 on our Classic Card (after the promotional rate expires, rate will reflect our standard cash advance rate of 9.9% APR, subject to change) and 3.9%3 on our Founder’s Card with no balance transfer fees (after the promotional rate expires, rate will reflect our standard cash advance rate, which is Prime plus a margin of 9.15%). These current offers are good through December 31, 2021, giving you plenty of time to enjoy the lower interest rate.

Even after the promotional balance transfer rates expire, our regular interest rates are typically lower than industry averages, so you’ll likely still save money paying down any remaining balance on the card, saving you money in both the short and long term.

What’s the Right Choice for Me?
Ultimately, whether it’s a car loan or a credit card balance transfer, you’ll need to evaluate your personal situation and make the best decision based on your circumstances. Take time to consider all of the factors listed above to determine if 0% financing will truly save you in the long run.

With low rates and loan term options to fit your needs, our no-hassle auto financing helps your vehicle fit into your life. To see our rates, estimate your monthly car payment, and apply for an auto loan, visit psecu.com/drive. The application process takes as little as 20 minutes and you’ll receive your loan decision fast – often within minutes and usually on the same day.

If you want to save big, consider moving your high-interest credit card balances to one of our Visa credit cards. We don’t charge an annual fee, inactivity fee, or application fee, and moving a balance from another credit card to your PSECU credit card is quick and easy. Find out how much you can save and apply at psecu.com/move.

1Rates reflect a .25% APR reduction for Automatic Payment Service and loan amounts up to 100% of the retail value of the vehicle. Your rate will increase if you discontinue Automatic Payment Service. PSECU will charge an additional 2% to the current interest rate when financing a vehicle for more than 100% and up to 120% of the retail value, and an additional 3% to the current interest rate when financing a vehicle for more than 120% and up to 130% of the retail value. PSECU will only finance up to 100% of the retail value of the vehicle for refinance of an existing PSECU vehicle loan. Monthly payment example: 36 monthly payments of $28.86 per $1,000 borrowed at the 2.49% APR or 60 monthly payments of $18.19 per $1,000 borrowed at the 3.49% APR. The Manufacturer’s Suggested Retail Price determines new vehicle values; Kelley Blue Book® or other authorized guides determine used vehicle values. Minimum value is $3,000. PSECU makes all final decisions regarding vehicle value and proper rate. Loan rates are subject to change. Kelley Blue Book® is a registered trademark of the Kelley Blue Book Co., Inc.

2PSECU Visa® Classic Card/Visa® Alumni Classic Card: When you take advantage of the 2.9% APR (Annual Percentage Rate) promotional offer, Visa® balance transfers will be treated as a cash advance and will accrue interest at 2.9% APR from the time that the transaction posts until 12/31/21; thereafter, any remaining balance will begin to accrue interest at the cash advance rate, which is currently 9.9% APR and subject to change. Payments will be applied as stated in your Visa® Classic and Visa® Alumni Classic Consumer Credit Card Agreement. A minimum of $250 must be requested for balance transfers through digital banking. Our 2.9% APR promotional offer cannot be used to pay off any PSECU loan or be made payable to cash, yourself, any joint owner(s) or co-maker(s). Balance transfers access credit under the terms of your Visa® account as stated in the Visa® Classic and Visa® Alumni Classic Consumer Credit Card Agreement.

3PSECU Visa® Founder’s Card/Visa® Alumni Rewards Card: When you take advantage of the 3.9% APR (Annual Percentage Rate) promotional offer, Visa® Founder’s Card/Visa® Alumni Rewards Card balance transfers will be treated as a cash advance and will accrue interest at 3.9% APR from the time that the transaction posts until 12/31/21; thereafter, any remaining balance will begin to accrue interest at the cash advance rate, which is a variable APR equal to the Prime Rate plus a margin of 9.15%. Payments will be applied as stated in your PSECU Visa® Founder’s and Visa® Alumni Rewards Consumer Credit Card Agreement. A minimum of $250 must be requested for balance transfers through digital banking. Our 3.9% APR promotional offer cannot be used to pay off any PSECU loan or be made payable to cash, yourself, any joint owner(s) or co-maker(s). Balance transfers do not qualify as eligible purchases for the cash back reward program. Balance transfers access credit under the terms of your Visa® Founder’s Card/Visa® Alumni Rewards Card account as stated in the PSECU Visa® Founder’s and Visa® Alumni Rewards Consumer Credit Card Agreement.

The content provided in this publication is for informational purposes only. Nothing stated is to be construed as financial or legal advice. Some products not offered by PSECU. PSECU does not endorse any third parties, including, but not limited to, referenced individuals, companies, organizations, products, blogs, or websites. PSECU does not warrant any advice provided by third parties. PSECU does not guarantee the accuracy or completeness of the information provided by third parties. PSECU recommends that you seek the advice of a qualified financial, tax, legal, or other professional if you have questions.

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