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0 APR Credit Card Truths and Traps (Page 1 of 2)
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 0 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 for the in 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 multiple APRs including the following: 1) 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 expiry period and remember to pay off before the period ends inorder to avoid hefty interest charges.
2. Once the introductory period is over, the 0 APR credit card may have a ridiculously high interest rate like 20% or higher.
Balance Transfer Credit Cards – An Overview
What Is A Balance Transfer Credit Card?
Simply put, a balance transfer credit card allows you to transfer your card balances over from your other credit cards. Through this transfer you can save money on the APR. If you can consolidate all your balance to a single credit card, you can easily keep track of your debt.
Why Should I Transfer My Balances To A New Credit Card?
Balance transfer credit cards, when used correctly, can help you save money. Most people keep a balance on one credit card, a separate balance on yet another, and pay a high APR to maintain both of them. Balance transfer credit cards have outstanding introductory APR’s and the very best balance transfer credit cards will have a comparably lower ongoing APR as well.
Some of the best balance transfer credit cards offer an introductory APR of 0% for an extended period. Those people who are in a debt trap can take advantage of this offer. There are even some balance transfer credit cards which prolong the introductory ARR of 0% until you have paid off all the balance that you have transferred. Certain balance transfer credit cards have a fixed rate and the rate remains the same until you pay off the balance transferred. This type of card, often times lacks the introductory 0% APR offer.
Things to Remember
It is not difficult find a balance transfer credit card, and in fact, you might have already been receiving solicitations from several credit card companies. But finding the best balance transfer credit card can sometimes be a murky affair. Understanding certain key elements regarding these cards can help you to choose the best.
Most people fall for the introductory offer given by the balance transfer credit cards. But this is only for a specific period of time. The period of time offered on these introductory APR balance transfer cards is often times determined by your credit history. So while selecting a balance transfer credit, keep a close eye on the introductory offer. Make sure that the introductory offer will work in your favor.
In some instances, some credit card companies will require an initial balance transfer along with the application for the card. Some people might not be comfortable with such a demand. The best balance transfer credit cards provide flexibility on balance transfers that will allow you to transfer balances at anytime during the introductory period.
Some of balance transfer credit cards might have a fixed rate introductory offer which is not a 0% APR on balance transfers, but is very low, remaining constant until you pay off the balance.
Most balance transfer credit cards have a transfer fee. Make sure that the transfer fee does not negate the financial advantage you are trying to get from the whole process. This aspect should be considered seriously by people who are planning to transfer balances from two or more cards. There will be no transfer fees incurred with the very best balance transfer credit cards.
You should compare your existing cards interest rate with that of the balance transfer credit card. While comparing include all the fees associated with each card as well. And if you are planning to use your balance transfer credit card for ongoing purchases, make sure to get the complete details, including ongoing APR’s on purchases, penalties, late payment fees and any miscellaneous surcharges that might be incurred when using the card in this manner. Make absolutely sure that there are no hidden charges.