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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.
Personal Loans: The easiest solution even with Bad Credit
If you are in need of money but you dont want to undertake any complex financial transaction, personal loans are the right option for you. Personal loans are designed to provide money for applicants with little requirements and very flexible repayment processes.
Secured or Unsecured
Personal loans come in two forms: Secured and unsecured personal loans. Secured loans are guaranteed by the client with a personal asset such as a real estate or a vehicle. Unsecured loans on the other side dont require any collateral. But, though you may say this is the only difference between the two kinds of loans, the truth is that this difference has many consequences.
Secured loans involve less risk for the lender and this turns into lower interest rates, longer repayment periods and lower monthly payments. As opposed, unsecured loans imply higher risks for the lending institution and thus carry higher interest rates, shorter repayment periods and higher monthly payments.
Get Your Credit Report
Knowing your credit report before applying for a loan is essential. Credit agencies are required to provide you with a free copy of your credit report as per your request, so dont waste this opportunity.
Demand your free copy and make sure there are no errors or inaccuracies and if you find something that needs to be corrected, act immediately and contact the credit agency. Credit Agencies are prepared to deal with this kind of problems and are required by law to attend at your request for revisions.
Bad Credit is not an obstacle
If you suddenly discover that past financial mistakes have shattered your credit score, you dont need to worry. There are many people in the same situation and the financial industry, as creative as it is, has shaped solutions for people with bad credit, no credit at all or even for those who have gone through bankruptcy.
There are many lenders now offering personal loans for people with bad credit, the conditions are not as good as regular loans but they are a good way to rebuild your credit and a better source of finance than credit cards. The interest rate on credit cards is usually 50% higher than bad credit personal loans and the monthly payments of a personal loan are usually fixed so you wont have to worry about sudden variations.
Make sure you use the money to cancel outstanding debts and credit cards balances in order to immediately improve your credit score. If you do so, further monthly payments on the new loan will contribute to enhance your credit till youll finally leave the bad credit category and enjoy the benefits of having good credit.
Follow this advice and stay in the right path. Avoid requesting loans and credit cards youll fail to pay in the future. Learn how to make a budget and stick to it. These are healthy financial behaviors and will make your life peaceful and secure and youll easily save that extra money you need to enjoy your life. Debts on the other side wont let you sleep. Be smart and make conscious decisions when your finance is at stake.