Low interest and zero percent introductory rates for credit cards have been with the financial industry for over fifteen years. These 0% credit card are a welcome reprieve from the high interest rates commonly found on credit cards, with many currently being at around 18% and higher. Today, almost all credit card companies offer a type of incentive rate during the introductory months of receiving the card, usually the first six to twelve months. The most popular credit card offer being a 0% APR on your credit card purchases or balance transfers during the introductory period.
Facts About 0% APR Credit Card Offers
The history of low APR offers began in the late 80’s with monoline banks, otherwise known as limited-purpose banks. These banks only processed credit cards and didn’t issue loans or deposits. During this time, the so-called APR teasers lured consumers into believing that the card’s low APR would last forever, not knowing that the rates will dramatically increase after a few months. The same holds true today in the financial industry.
With these enticing credit card offers, many consumers just grab the opportunity and forget to look deeper than just the interest rates involved in the first “honeymoon” year. They forget to research the facts about these card offers, including the ongoing APR that the card will revert to after the introductory period. And, it is these high interest rates that are precisely what is keeping some consumers in debt.
When the monoline banks entered the financial world, they took advantage of a fully available consumer credit database and introduced their tempting offers to targeted consumers through mail. Again, not much has changed within the credit card industry. When you receive these low APR credit card offers, it’s difficult not to be tempted. Most of them claim that you will not pay interest on any kind of purchase or balance transfers for the first period of your credit card. It is not, however, as simple as that. You should consider several important things about low or 0% APR before signing the card application contract. This includes:
0% APR Honeymoon
The majority of credit card companies that offer 0% interest rate deals are only good for a limited time. Meaning, the honeymoon will end eventually. For credit card companies, you will be offered 0 percent APR only for the first six months or twelve months, at best usually. This information can be found in the fine print of your credit card. Make sure to find out definitively when your “honeymoon” will expire on the card.
0% APR Not for New Purchases
After making your decision between the various 0% APR credit cards available, don’t just go using the card on every little item you desire. Why you ask? Because, often times, new card purchases will not qualify for the 0% interest.
Some credit card companies only offer 0% APR on all balance transfers. In rare instances, certain card offers will offer the teaser rate on balance transfers as well as on any purchases made during the honeymoon introductory period, but this is the exception not the rule. Typically, however, card issuers and banks will only offer the 0% APR on balance transfers and will stick you with high interest rate charges for any of your new purchases made with the card.
Late Payments Can Void the Introductory Rate
When you forget to pay the bills or you mistakenly miss the due date on this credit card, the 0% APR offer may immediately become null and void. The introductory 0% rate automatically expires with that first late payment and the interest rate on your outstanding balance will revert back to the much higher APR. Ouch! That being said, make absolutely sure to pay AT LEAST the minimum payment (preferably more) on time every month. Otherwise, you could be in for a rude and expensive financial jolt until the card balance is paid down in full.
0% APR Honeymoon Hangover
After the introductory period, be prepared to face much higher ongoing APR’s on the card. In general, the ongoing interest rate will increase to upwards of 19% and beyond after the introductory period is over.
Low or 0% APR interest rates can help your finances temporarily. Never assume that these offers can save you from debt or solve you’re inability to control your spending. Just remember that when transferring credit card balances to another card, the 0% APR will help you organize your finances temporarily but will not remove the debt obligation or prior credit damage incurred. Choose your credit card wisely and always ask important questions before signing the contract.
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