0 APR credit: Hidden Charges Behind 0 APR

2007-06-20 15:49:53

( Financial )



APR or what we commonly know as annual Percentage Rate is the interest rate charged by credit card issuers every year. Long ago, a regular APR was founded on bank rates. Low APRs came into existence with the arrival of monoline banking. Monoline banks focused only in issuing credit card and did not allow any deposits or grant conventional loans.

Zero Percent or Higher?

When credit cards are marketed as being a 0 APR credit card, the company is actually asserting that no APR is being charged. In the APR, the interest is based on the unsettled balance of your card.

In truth, not all 0 APR credit cards are similar. In the long term, 0 APR credit cards wind up quite costly. The majority of these 0 APR credit cards provide reduced rates for a short span of time, traditionally lasting for six months to one year. At the expiration of the introductory period, the rate becomes higher. On the premise that the rate will increase, always check out if the rate of the APR that will be charged will be a permanent rate or not. An APR that has a fixed rate will not change while the other can be altered through time.

Considerations in choosing a 0 APR Credit Card

To decide on a 0 APR credit card, a comparison of the following features is a must:
• The opening period which covers the 0 APR
• The basic APR at the termination of the introductory period
• The annual charges that will be credited to the card
• Is balance transfer allowable, and
• The credit rating type needed to be availed in order to get the 0 APR credit card.

The grace period prior to the application of penalties to your citibank credit card should also be contemplated when evaluating various credit cards. Some 0 APR cards charge higher rate if bill is unsettled after the grace period.
The charges that are packaged to your credit card is another feature that should be considered when comparing credit cards, because these can be accumulated and your 0 APR will have no bearing.

Before reaching your final decision, you may also want to check out other benefits you will receive when you avail of the 0 APR credit card. For example, when you are the kind of credit card holder who does not settle credit card balances every month, a 0 APR credit card may be appealing to you.


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