Credit cards can be considered to be one of the many basic necessities of the modern world. Credit cards are available nowadays in abundance. One type of credit card specifically is the so-called 0% APR credit card.
What is a 0% APR Credit Card? Many of us have heard about them, but has anyone every explained 0% APR credit cards to you?
For starters, the APR or annual percentage rate is the rate of interest credit card companies charge on outstanding payments.
The amount you are charged depends not only on the interest rate; but also on the method of calculation of rates of interest. 0% APR credit cards are credit cards that charge you no interest on credit, for a specified period of time.
Some 0% APR credit cards offer 0% APR’s to customers for up to 12 months.
After 12 months the credit card issuer charges you at the normal rate. The card issuer assumes a risk by offering you interest free credit for such an extended period.
They balance that risk by offering 0% APR credit cards to only customers with the best credit.
A true 0% APR introductory offer is different from a deferred interest offer.
Some 0% APR intro offers wipe the slate clean on interest completely. So if you don’t pay off the total balance transfer or purchase within the introductory period, you don’t pay retroactive interest.
You simply start paying the regular interest for the remaining balance moving forward. Fortunately, retroactive interest policies like this tend to occur mostly with retail credit cards.
What Determines Your Credit?
Your credit depends on a number of factors. Your credit score, also known as the FICO score is widely used as a credit rating for Americans. Since your credit rating will determine whether you are issued a 0% APR credit card; knowing what goes into the score helps a great deal.
Your credit score is determined based on five parameters. The most important among these parameters is your current debt and your history of repayment of debt.
People with credit scores above 770 usually qualify for a 0% APR credit card. 0% APR credit cards typically require, at a minimum, very good credit and often will require excellent credit.
0% APR credit cards were introduced in the late 1980’s and to this day has still proven to be one of the most sought-after credit card types available anywhere.
As with all card types, there are a certain tips and tricks all potential applicants should be made aware of.
With the help of a 0% APR credit card, it means that you need not only pay the outstanding balance; and what more you could even charge up to the limits without having to sustain any monthly interest charges.
We tend to think just how these companies can afford to provide 0% APR, and make a profit?
Although these cards may not comprise any monthly charges, it is sure to come with annual fees. Which you are obliged to pay for the privileges.
These annual fees usually run from $15 to $20 or sometimes, even higher. Having a 0% APR credit card doesn’t mean that you can pay your dues whenever and whichever way you intend to.
It IS necessary to make your payments on time, or else, you will have to pay for high overdue fees.
For each late payment, the 0% APR credit card holder has to pay fees that may range from $20 to $40. With habitual late payments, these meager amounts may accumulate to a hefty total!
It should be remembered that 0% APR credit cards are usually offered for only a stipulated period of time. This credit card interest may hold good for only a fixed period of time, usually ranging from 3 up to 15 months.
On the completion of this period, a higher rate of interest may come in vogue, usually 12% or higher. You could easily transfer any existing credit card balances to a new 0% APR credit card to get 0% interest on the transferred balance.
In this way, the credit card holder has to pay less interest for a stipulated period of time. And, thus get a chance to clear outstanding balances as quickly as possible.
When applying for a 0% APR credit cards, it is always better to read the terms and agreements.
Not to overstate an obvious question, but why should one do so? Simply because many credit cards may come with a default rate wherein late payments may incur a late payment fee.
And, it might also include a default rate that will be added to the annual percentage rate.
This in turn doubles the figures on the existing balances and on the new purchases made on the card moving forward.
One very important point to take into account when applying for these cards is to read all paragraphs of the agreement; otherwise known as the fine print.
This is because though it is illegal for a credit card company to hide their fees and charges. But, it is legal for them to mention these points in small print!
The 0% APR credit card companies thus usually announce in large and bold print about their 0% APR but hide the facts that this is only for a limited period of time.
And, any extra fees which might be included are done so in very fine print.
Another trick that is up the sleeve of these credit card companies is to install sky-high APR’s right after the amount of 0% APR balance transfers are paid down.
In other words, the money you first pay to the credit card company is applied to the transfer, and any other purchases you make will be charged a high APR.
Sometimes, credit card companies may also go to the extent of sending you a different card than the 0% APR credit card you had initially applied for.
In this way, you are not allowed the 0% APR but a different card offer with different terms and conditions.
The card issuers typically rationalize this behavior based on the card issuer determining that you do not meet the qualifications for a 0% APR credit card.
Qualifications for a 0% APR credit card is usually found in the small print of the agreement, and is usually overseen by applicants!
It can thus be seen that though 0% APR credit cards do seem to be rather inviting, there are some loopholes and tricks to their use.
As always, it is highly recommended to read the terms and conditions on the card application agreement for the 0% APR credit card. Or, any type of credit card application, thoroughly in order to avoid any future problems, headaches or financial surprises.
Choose your credit card provider with care and you can enjoy your credit card for many years.
Are you ready to get your first 0% APR credit card? If so, check out the credit companies recommended to you by Inker Street Consumer Credit Advice.