If you are struggling with ever-increasing credit card debt, a 0 APR credit card could be the magic wand for you. There are several 0 APR credit cards in the marketplace. These 0 Interest credit cards offer cardholders zero percent on new purchases. Also, certain 0 APR credit card offers allow balance transfers, lowering the interest burden even further.
These types of 0 APR credit cards are offered by popular credit card lenders, including American Express and Citibank. Chase, HSBC, and Discover also offer 0 APR credit cards. 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 typically offered for ninety days to as long as 12 months. Cardholders will have to pay a higher ongoing interest rate at the end of the interest-free or zero percent periods. Generally, these rates could vary between 10 % – 14% and sometimes can be as high as 24%.
A card with zero APR is ideal when you want to purchase something expensive but cannot find another way to finance it. There will be no interest charges for this. In addition, 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 credit cards with 0 interest allow balance transfers from your existing higher interest cards. In fact, many will waive the transfer fees. This is one of the best methods to pay off debts faster, leading to substantial savings on the interest charges incurred.
It is possible that a single credit card can have multiple APRs, including the following:
- One APR for balance transfers, one for purchases, and one for cash advances – the APR would normally be higher for cash advances than balance transfers and purchases.
- 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.
- Introductory APR – 0 APR as the initial offer and a higher rate upon expiration of the introductory period.
- 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 inform yourself about the often-untold catches in these lucrative offers.
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 expiry period and remember to pay off before the period ends 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.
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.
Complete Payment – Certain 0 APR cards require you to pay off the balance entirely before the expiration period of the introductory offer. If not, the high-interest default rate could apply to the entire balance. Ensure that you understand these credit card terms clearly.
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, some cards offer 0 APR on balance transfers only with higher applicable APR’s on new purchases.
Other Fees – Some credit card companies compensate the 0 APR by charging high annual fees or transfer fees on balance transfers.
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. Anything more will charge the default higher APR.
While it may be an attractive offer to go for 0 APR credit cards, it may not be a wise decision in specific scenarios. So, before you seriously consider a 0 APR credit card, it is essential to compute credit balances. In addition, you should compute the interest rates, and pay off capability. Read the terms and conditions carefully to avoid credit traps. Understanding the fine print could have substantial savings apart from a trouble-free credit rating.