Many issuing banks offer 0% interest credit cards to potential customers seeking their business. Are these offers valid? Or, is a catch 22 lurking somewhere within the fine print?
What Does Zero Percent Interest Really Mean?
A zero percent APR (annual percentage rate) credit card offer is a typical promotional gimmick many issuing banks offer potential customers. Everyone loves the sound of zero percent APR, and many of individuals rush to fill out the credit card application based upon this great sounding deal. However, zero percent APR offers are not permanent.
The zero percent APR is a temporary promotional rate, and typically lasts between 6 and 12 months. This zero percent APR promotion is usually offered for purchases only; however, some banks do offer a zero percent APR for balance transfers as well. After the introductory zero percent APR term has finished, then the standard APR comes into effect. Many standard APRs fall between 11.99 percent and 14.99 percent. Make sure to read the terms and conditions of your cardholder agreement to find out what the standard APR will be after your 0% introductory rate ends.
What Are the Potential Pitfalls of Zero Percent Interest Offers?
Since these zero percent interest offers are typically for purchases, you still have standard APRs and fees for other transactions such as:
- Cash Advances
- Balance transfers
- Foreign currency transactions
- Membership Fees
The most costly are cash advances. If you have not read your cardholder terms and conditions, then seeing finance charges on your statement for your cash advance will be an initial shock.
The biggest pitfall of the introductory zero percent APR lies within your hands. One missed or late payment and any over limit on your account may cause you to lose the zero percent APR before the promotional period ends. Not only will you lose the remaining time of the zero percent APR, but you may also lose the low standard APR that would have taken effect after the promotional period, and end up with the extremely high default APR. Default APRs range from 23.99 percent to 31.99 percent, which is costly in the long run.
What You Should Do to Make the Most of the Zero Percent Introductory APR
There are important aspects of your zero percent credit card offer that you need to pay attention to. These steps will help you make the most of this type of offer:
- Read very carefully the terms and conditions of your cardholder agreement to find out all rates, promotional information, and fees
- Refrain from taking out a cash advance on the credit card
- If the zero percent APR does not cover balance transfers, you may want to reconsider if transferring your balance is worth the cost
- Make sure you always pay your bill on time.
- Pay off your balance a month before your introductory zero percent APR period ends to not incur any finance charges afterwards.
Yes, zero percent interest cards do exist, but for a temporary period of time. The catch lies within the terms and conditions of the cardholder agreement, so read them carefully. Managing your account and your spending wisely will make your introductory period enjoyable. Due diligence on your part will maximize the benefits of your zero percent introductory APR.