Is a 0% APR Credit Card Right for You ?
As the competition between various credit card companies increases, they are using more attractive marketing ploys to acquire new customers. Certainly, one of the more attractive offers would be the 0% APR Credit Card offers.
APR stands for Annual Percentage Rate. This is the amount of interest you will pay on any outstanding credit card balances. 0% APR means no interest will be charged from the credit card issuer for the entire length of the offer. This is providing, of course, that you make all of your payments on time.
0% APR Credit Card Offers Can Come with Various Terms:
- 0% APR for a limited period of time
- 0% APR on purchases only
- 0% APR on balance transfers only
- 0% APR on both purchases and balance transfers
The credit card holder needs to realize this kind of offer is simply a marketing strategy. The 0% interest rate will not last for an extended period of time. Credit card issuers are in the business of issuing credit cards to make a profit. They are willing to offer you a rate of 0% APR for a short period of time, because they are counting on the fact that you will have their credit card for years to come.
Since this would likely be the case, they will have plenty of time to make their profit over the entire length of time you continue to use their credit card. The 3 questions listed below will help you make an informed decision before applying for this type of credit card.
How Long Will My 0% APR Credit Card Offer Last?
Some credit card companies extend this offer for 9 months, some for 12 months and others for an even longer period. Most times the length of your offer will depend on your credit history. All other things being the same, the card with the longest interest-free period should be the one of most interest to you.
What Will My APR Be After the 0% Introductory Period Expires?
Check the terms and conditions to see what the interest rate will be once the zero interest offer expires. Because the credit card company is already losing revenue by allowing you to pay 0% Interest, they may try to compensate with a higher APR after the 0% introductory offer expires.
Ideally, you would like to find a credit card which will give you a reasonable length of time to enjoy the 0% interest offer, as well as offering a competitive interest rate thereafter.
However, if the credit card is offering a 0% introductory interest rate for 12 months or more and you make all payments on time, you can always apply for a new credit card when the 0% offer expires. Then transfer your balance to the new credit card.
Do not do this too often, as credit card companies are not impressed with consumers who are constantly transferring balances. Additionally, be sure NOT to cancel one card when applying for another. The decrease in available credit will take points off your credit score.
What Are the Additional Things to Consider?
The idea is to get the maximum benefit from the 0% APR Credit Card. Cards with high annual fees or other charges could put a dent in any savings you were counting on in applying for the credit card in the first place.
If the credit card company tries to compensate for the loss in revenue by charging exorbitant fees and charges on other services it would be best to continue comparing other cards.