A 0 balance credit card is a unique kind of credit card that doesn't have any balance to pay until you make a payment. Instead, you get an “out of balance” figure which you won't get to pay until your next check comes in. This means you can continue using your credit card indefinitely after you've reached your maximum credit limit. If you're good at managing your spending, then you'll probably only be interested in a 0 balance credit card.
The reason why you'll get a 0 balance credit card is because you don't make any monthly payments. Instead, you simply make your minimum payment for as long as it takes until your balance is paid off. Once the grace period expires, your interest charges will start piling up. That's why it's important to use a 0 balance credit card only for emergencies. Even if you do qualify for a standard checking account, it may not be a good idea to carry a balance from one month to the next. Your minimum monthly payment on a checking account isn't much, but you'll end up paying quite a bit more if you carry a high balance from one month to the next.
One reason you should only use a 0 balance credit card for emergencies is that transferring your debt to a low interest loan may be a better option. For example, if you need to buy something and you don't have enough money to do so, you may want to transfer your high interest debt from a high-rate credit card to a lower rate loan. This is known as a “second chance” or “secured loan.” There are many banks and credit unions which offer a second chance or secured loans which will give you a better interest rate than your current bank or credit union. And if you pay your debt off in full every month, you won't owe any more interest charges than you would have if you had continued to make your monthly payments.
If you want to use a 0 balance credit card for emergencies, or even just to stop using a higher interest credit limit, you also need to learn about your credit limit limits. If you know you don't have enough money to make the large purchases you want to make, before you make your purchases, take a look at your current credit limit. If you don't have enough credit to cover your purchases, change the amount of money you're paying on your monthly bill to the lowest amount you can afford to pay. Then you won't have to worry about being in the red.
You may also find that it makes sense to take a new credit card payment for some of the smaller purchases you make. Many times, people get into trouble by not remembering to make a credit card payment when they should. It can be a real hassle to try to remember when your due date is, and then when it's just too late to make the purchase and the store won't charge you an extra charge. So before you go out and buy something that you think you might need, make sure you've made all of your credit card payments on time.
Another reason people will use a 0 balance credit card debt consolidation loan is when they've fallen behind in their bills. Most credit bureaus consider someone 5 years behind in payments to be “past due.” This means that they've reached the maximum amount of credit that they can have, and the bureaus are going to charge them a high interest rate. On top of this, it will be difficult to get a good rate on a debt consolidation loan. In most cases, you'll end up paying more in interest than you would with a conventional debt consolidation loan because you're considered to be past due.
One way to avoid these problems is to transfer all of your balances onto one credit card. By doing this, you'll only have to worry about making one payment each month instead of several different ones. You'll also find that transferring your balances onto a different credit cards will actually help to raise your credit score, as well. Since different credit cards have different interest rates and different payment options, this can be a very good thing.
If you've done everything you can to keep your balances low, and you still need to consolidate your bills, then it may be time to see if a 0 balance credit card fee is right for you. This fee is generally charged to you in addition to the interest rate that you currently pay. It's important to understand how this will affect your credit score, though. With a new credit card, it can actually help you move toward being debt free, and in some cases, even eliminate it completely!