Tag Archives: percentage

What Is a 0 APR Credit Card?

It’s like the search for the Holy Grail. Before the days of King Arthur and the roundtable of Camelot, people have hunted for this holy relic and its promise of eternal life. Just the same, consumers the world over have searched for their lives for the holy grail of the credit card world: a card with 0 annual percentage rates, or no interest at all. Such a card could provide eternal shopping, and a life without fear of debt.

The reality of the situation, however, may be slightly different. Don’t get us wrong. A card with 0 annual percentage rate is a beautiful thing. It allows you to carry debt on the card without fear of swamping your finances with interest payments. On the other hand, the 0 annual percentage rate is not a free ride to spend to excess. After all, most of these 0 annual percentage rate, or 0 APR cards, have a time limit. The carriage, so to speak, eventually turns back into the pumpkin, and then you could be left holding the bag with a maxed out credit card and a new APR of, say, 22 percent.

So, what exactly is a 0 APR credit card? Is it such a great deal anymore, or should you not chase after the holy grail? It depends, as with any great decision. If you plan to be making a lot of heavy purchases soon—such as to decorate a new house—you may want to find yourself a 0 APR card, but do so with the understanding that you must be able to pay that baby off when the 0 annual percentage rate special wears off.

Don’t just jump at any 0 annual percentage rate card, though. There are always other considerations to make when you’re on the market for a new credit card. For instance, how widely is the new card going to be accepted. If you travel a lot, this is important to know. MasterCard and Visa are the two most widely accepted brands of cards on the market, with 17 million and 16.2 million locations respectively.

And of course, every credit card now has a rewards program. What sort of rewards programs would suit you best—one that involves cash back and discounts on every purchase, or would you rather earn points toward travel and other prizes? Plus, no matter what the rewards are, compare the ratio of earned points to dollars spent. The higher this ration, the better the rewards program is, no matter what the rewards are.

Lastly, check the fees on these 0 APR cards. Is there an annual fee, a cash transfer fee, late fees, stiff penalties, etc.? These also could help you make up your mind about the card.

Cash Back Credit Cards – Solutions With "Catches" (Page 1 of 2)

Cash back credit cards are now being made available in a variety of new options. However, it is important for consumers not to skip over the process of researching all details of a card before applying. Cash back credit cards, although useful credit card solutions, also frequently carry with them several “catches” (targeted reward categories, high credit necessary to apply, potentially capped rewards) that consumers need to inform themselves about in order to maximize their effective use of the cards.

In a world of rising gas prices and falling employee compensation, it’s more true than ever that a small amount of cash can go a very long way. This, at least, is the logic behind the variety of new cash back credit cards that now flood the market from many major providers. These cards offer a number of different cash back plans for several types of purchases: cash back for retirement, for charity, for affiliate products. All are designed, at least in part, to encourage credit card use by returning some percentage of the purchase price to the consumer at the end of the year. It sounds like–and can be–a good deal, the literal truth of the classic adage “spend money to make money.”

But in addition to the good deal, cash back credit cards carry with them hidden hooks and lines. The card application always lists these plainly, but customers who just want to cash in on the promise of quick percentage rewards can often overlook the most crucial caveats of all. More savvy customers, however, should ask themselves maybe the most important question anyone can ask when considering a new credit card: what’s the catch?

The first catch is that the high-end cash back rewards don’t usually apply to entertainment, housing, or luxury items. Since these make up a large portion of most people’s paychecks, anyone who believes that a hypothetical 5% cash back guarantee will apply to everything purchased with that cash back credit card will be in for a rude surprise. The higher fees are typically targeted toward fundamental goods in our society: supermarket purchases, drugstore runs, gasoline. Most of the best cash back credit cards offer a flat 1% fee on other purchases, which can be substantial by the end of a year, but still possibly not what the customer who only glanced through the brochure expects.

Another big catch is the high credit rating necessary to get one’s hands on any of the best cash back credit cards. The most popular cards all require at least a good credit rating, with many asking for excellent. The effect of this is to push the target market of typical cash back credit card consumers toward two groups: first-time credit card applicants and the very financially prudent. And it is a nice bonus for people with good credit (or at least no bad credit) to be able to earn typically 1% of the purchase of price back on most goods, but for anyone in dire financial straits looking to put together some extra money through cash back rewards, it would be wise to look elsewhere.