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Posts Tagged ‘0% APR Credit Cards’

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.
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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? Well, 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 rate of interest, 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. The best 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.

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.

The other three parameters for calculation of credit score are the length of your credit history, amount of new credit and types of credit used. Based on these five parameters, the individual is given a score ranging from 300 to 850. This is indicative of the credit worthiness of the person at a particular point of time. People with credit scores above 770 usually qualify for a 0% APR credit card. However scores above 700 are also considered good. 0% APR credit cards typically require, at a minimum, very good credit and often will require excellent credit.
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With the plethora of credit card options available today, you can use plastic to pay off debt and save money. Using a credit card to get rid of debt, rather than rack it up, may sound strange. But it is possible with 0% APR credit cards. All of the major credit card companies offer 0% APR credit cards. They are a great way to save hundreds, even thousands, of dollars on interest. If you use them wisely, 0% APR credit cards will help you get one step ahead in the credit card world.

What 0% APR Credit Cards Are

APR stands for the annual percentage rate on your credit card. When credit card companies advertise 0% APR, they are giving you the chance to carry a balance on your card and not pay interest on it. The timeframe for this 0% APR is usually between six months and a year.

Some credit cards only include 0% APR on new purchases. Others offer the 0% interest rate for purchases and balance transfers. With the balance transfer option, you can shift the amount that you owe on a card with a high interest rate to the 0% APR credit card. If you pay off the balance within the introductory period, you will avoid paying high fees in interest.
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Low interest credit cards are available as alternatives to those with middle-of-the-road to very high interest rates. If you have a credit card with a high interest rate anywhere from 17% to 24% or higher, then you may not realize that it is costing you hundreds and even thousands of dollars every year in interest alone. Once you understand your credit and how it is impacting your debt situation, you will see how low interest or even 0% APR credit cards can be a much better solution.

Gather Your Statements

Collect your statements for all high and low interest credit cards. Include Visa, MasterCard, American Express, Discover, department stores, retailers, grocers and any other revolving accounts. For each bill, make a record of the total balance, minimum payment amount and interest rate. You might also want to include your estimated monthly payment (if it’s more or less than the minimum) and the monthly finance charge.

Compare Cards

If you compare the numbers for each card, you will be able to see which ones are costing you the most money. The higher the APR and the higher the balance, the more you will end up paying in interest in the long run. And, if you only pay small amounts of what you owe, you can go on paying for over 20 years. Now you can see the benefit of having a low interest credit card.

Categorize Your Debt

Once you’ve figured out which are the low interest credit cards and which are high, you need to categorize them from highest to lowest. Then reorder them, if necessary, based on the estimated amount of interest you would pay for the entire year. In other words, if you have a high rate card with a low balance, the overall interest may be less than a low interest credit card with a very high balance. This step will help you to focus on the cards that are taking the most of your hard earned money.
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