0% Apr Credit Cards – Are They Too Good to Be True?

July 1, 2009 by  Filed under: Credit 

How are credit card companies able to offer 0 APR credit cards and still turn a profit? Well, since interest rates went up they don’t make as much as they used to but zero APR cards are still available and are easy enough to find if you know where to look, and the internet is probably the easiest and best way to do just that.

What you are probably wondering is why do card providers offer 0% APR if there is little profit in it for them, what’s the catch?

You are quite right to ask the question, credit card companies will never offer something for nothing so where do they make their money and what should you look out for?

– 0% APR credit card offers only last for a limited time, generally no more than twelve months but what will the interest rate revert to at the end of this offer period?

It’s perfectly understandable for the credit card companies not to run these types of offers to individuals indefinitely, it would be nice to think they could but the reality is that they do need to make a profit , so it isn’t going to happen!

But what the rate will revert to is extremely important as this will dictate whether or not the offer is worth pursuing. Always be careful and read the offer fine print to find out exactly how much interest you’ll be paying later.

There is always the option to transfer to another 0% apr offer when your existing offer has almost ended and this is something that many people have done successfully in the past.

However, credit card companies have become wise this type of behavior and have started declining applications from individuals whose credit history show them to be habitual credit card hoppers, so don’t count on transferring to another offer to get away from a card that reverts to a high interest rate!

– Always check the level of annual fees.

If a card has an annual fee of $20 for example this will be perfectly acceptable but you should steer away from any card that asks for triple-digit fees as this will just eat into the savings you would make with the 0% apr offer.

– Beware of excessively high charges and penalties.

Late fees on credit cards are generally very high anyway, but you may find that they are extremely high with a 0% offer card. The card issuer may also increase the rate for late payers (this is called a “default interest rate”). A default interest rate applies to existing balances but may also apply to future charges as well.

0% APR credit cards are a great option if they are used correctly. Make sure you pay your bills on time, therefore avoiding any penalties, and pay as much as you can comfortably afford. By doing this your credit card debt can be eliminated before the end of this excellent introductory offer.

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