0 APR Cards Are A Big Bonus, But Watch Carefully

2007-03-08 10:33:40

( Financial )



If you have fairly good credit ratings, chances are you will get offers for 0 apr cards in your mail all the time. The offers of 0 apr credit cards and high credit limits, may be tempting. Examine them carefully to avoid unpleasant surprises.

The reason the bank is offering 0 apr credit cards is to get you as a new customer. The marketplace for credit cards is quite diverse. There are all sorts of offers, but these come with conditions.

Some cards offer cash-backs based on your spending, but have high penalty rates on late payments. Others have long grace periods, but charge steeply on spending over your credit limit. Some cards charge higher interest on ordinary charges, but make it easy for you to get cash advances.

The 0 apr cards allow you to transfer balances from your existing card at zero-percent interest. Eventually, the banks hope that you will forget the offer has ended (usually less than a year after you sign up) and let the rate bounce back to the higher standard.

While 0 apr cards do save you money from their zero interest incentive on balance transfers, you should be aware that any new purchases on the card even during the introductory period will be charged the normal apr. Only the transferred balance gets the incentive in the 0 apr cards.

Be aware that if you have a mixture of zero-interest balance and higher-interest balance in your monthly statement from your 0 apr credit cards, you may think that your monthly payments are allocated to the higher-interest balance first. This is not typically the case.

Your payments often are applied to the no-interest balance until it is fully paid, while the interest multiplies fast on your other balances and new charges. If you determine that this is how the 0 apr cards work, make sure you avoid using them for casual purchases.


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