Zero Percent APR Credit Card – Truths and Traps
If you are struggling with ever-increasing credit card debt, a 0% APR credit card could be the magic wand for you. There are a number of 0% APR credit cards in the marketplace. These zero interest credit cards offer cardholders zero percent on new purchases and certain 0% APR credit card offers also allow balance transfers, lowering the interest burden even further.
The Truth About 0% APR Credit Cards:
These types of 0% APR credit cards are offered by popular credit card lenders including American Express, Citibank, Chase, HSBC, and Discover. These cards have many benefits to offer if you have a good to excellent credit rating.
Keep in mind, that the zero percent offered with these cards is not permanent. It is an introductory rate and is typically offered for ninety days to as long as 12 months. At the end of the interest-free or zero percent periods, cardholders will have to pay a higher ongoing interest rate. Generally, these rates could vary between 10 % - 14% and sometimes can be as high as 24%.
A 0% APR credit card is ideal when you want to purchase something expensive but cannot find another way to finance it. There will be no interest charges and you will have the introductory buffer period to pay off the expense. But buyer beware... make sure you can pay the purchase off before the introductory APR expires.
Most 0% Interest credit cards allow balance transfers from your existing higher interest cards and many will waive the transfer fees. This is one of the best methods to pay off debts at a faster rate, leading to substantial savings on the interest charges incurred.
It is possible that a single credit card can have varying APRs including the following:
1) Multiple APRs – One APR for balance transfers, one for purchases, and one for cash advances – the APR normally would be higher for cash advances compared to balance transfers and purchases.
2) Tiered APRs – Different APR levels can be assigned for different account balance levels or tiers, e.g., 15% for balances between $1 - $500 and 17% for balances higher than $500, etc..
3) Introductory APR – 0% APR as the introductory offer and a higher rate upon expiration of the introductory period.
4) Penalty APR – A penalty APR rate may apply if you are late with your payments.
The Traps to Watch Out For:
A 0% APR credit card is an attractive proposition, and often is too tempting an offer to resist. However, it is essential to be informed about the often-untold catches in these lucrative offers.
1) The 0% APR is a Limited Time Offer – In general, the 0% APR offered is only for a limited period. The period could vary from 3 months to 12 months. This implies that purchases made during this period will not attract any interest. You need to be cautious about the time period of the offer and remember to pay the balance off before the period ends in order to avoid hefty interest charges. Once the introductory period is over, the 0% APR credit card may have a ridiculously high interest rate like 20% or higher.
2) On-Time Payment – Most of these 0% Interest credit cards require you to pay the minimum payment on time every month during the introductory period. Late payments will result in penalties that include shifting the remaining balance to a much higher APR.
3) Complete Payment Required – Certain 0% APR cards require you to pay off the balance entirely before the expiration period of the introductory offer. If not, the default high interest rate could be applied to the entire balance going back to the date of purchase. Ensure that you understand these credit card terms clearly.
4) Applicability of the 0% APR – Most of the 0% Interest cards offer the 0% APR on new purchases and balance transfers in the introductory period. However, there are some cards that offer 0% APR on balance transfers only with higher applicable APR's on new purchases.
5) Other Fees – Some credit card companies compensate for the 0% APR by charging high annual fees or transfer fees on balance transfers.
6) Cap on Balance Transfer – Certain cards may have a cap or limit on the balance transfer amount. This means that the 0% APR will apply only for the amount within the cap limit and anything more will be charged the default higher APR.
7) While it may be an attractive offer to go for 0% APR credit cards, it may not be a wise decision in certain scenarios. So, before you seriously consider a 0% APR credit card, it is essential to compute credit balances, interest rates, and your pay off capability. Read the terms and conditions carefully to avoid credit traps. Understanding the fine print could have substantial savings apart from trouble free credit rating.
Contact Boe Credit Consulting today to learn how you can have the exceptional credit you deserve.
About the Author
Jeff Boe is a graduate of National American University, a Board-Certified Credit Consultant and the President of Boe Credit Consulting. He has successfully rehabilitated his own credit profile and, since 2005, has been working with consumers to educate and help them with improving their own credit.
In 2018 he started Boe Credit Consulting in order to help even more people improve their literacy as it relates to the credit system in the U.S. as-well-as to improve their credit reports and scores so they can be free to realize their financial goals.
Boe Credit Consulting specializes in helping credit-challenged consumers improve their credit reports and scores so that they can achieve their financial goals.
For more information, visit www.BoeCredit.com
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