I'm sure you've seen direct mail offers, promotional brochures and Internet ads announcing:
"0% APR credit cards. Limited time offer. Apply today!"
You can't beat that for a credit card. That's just like buying something with cash. A great deal, especially if you don't have cash on hand. But you may be wondering, "How can the credit card companies and banks make money if they aren't charging interest?" Well, read on to find out whether or not these 0% APR credit card offers are just pulling your leg.
Deal Or No Deal
Every time you buy something using 0% APR credit cards, you pay absolutely no finance charges or interest rate charges on your entire credit card balance. Just think... you can refurnish your home, pay for your child's college tuition or go out on a spending spree without paying a penny more.
However, most 0% APR credit cards offer only "introductory rates" at 0%. This low rate may be limited to a specific time period, such as 3 months or as long as a year. In addition, 0% APR credit cards often allow you to transfer balances (up to a specific amount) from another credit card to take advantage of the zero interest deal. Once the introductory rate period ends, then the APR can go through the roof.
Okay, so maybe you can't get 0% interest into eternity. But, if you play your card right, you can still reap the benefits of these unique offers.
Making Zero Interest Work For You
You may already have several credit cards and can't imagine what you'd do with another. After all... personal finance experts advise against having too many credit cards. Before getting a 0% APR credit card ask yourself, "What is the APR on my credit cards?" and "Do I carry a balance on my cards from month to month?"
The average interest rate for credit cards is around 14%. On the low end, you may have a card that charges as little as 5% interest, whereas cards for those with bad credit or no credit can be a whopping 29%. Retail credit cards tend to have a high interest rate around 19%, even if you have A1 credit. If the interest rates on your cards are up into the teens, then you definitely need to consider other options (a 0% APR credit card), unless you pay off your balances on a monthly basis.
Don't throw money out the window and into the pockets of the credit card companies. If you have high interest cards and pay only the minimum balance, then it can take years to pay off. $1000 spent could nearly double to almost $2000 by the time it's paid off. The best thing to do is transfer the balance to a 0% APR credit cards.
Where To Find 0% APR Credit Cards
If you have good credit, chances are you've already been bombarded with mail offers. You might even find these special values available through organizations you belong to or companies that you do business with regularly. Other sources include your local banks and credit unions. And don't forget to search the Internet. It's a great place to comparison shop for numerous credit cards. Keep in mind that you usually need to have good credit to qualify for a 0% APR Credit Card.
0% APR credit cards allow you to avoid finance charges altogether. If you are in debt, this is especially helpful in that you can pay down your balance much more quickly. But be sure you don't end up in a situation where you transfer balances from one card only to fill the old card back up again with new purchases. If you've been thinking about making a large purchase but don't yet have the funds and don't want to take out a loan, then a 0% APR credit card will be like paying cash. Just be sure to pay off your balance before the introductory rate ends and finance charges begin.
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