Back in 2002 and 2003, when interest rates on federal bank loans were at their lowest, many people were able to get credit cards with 0% APR from many different companies. Smart people could charge up to their limits without having to pay monthly interest because they only had to pay off the outstanding balance. When these cards were at their most popular, some people wondered, "How do credit card companies make money off of this kind of plan?" Well, good question! Let's look at 0% APR credit cards and how they really work, as well as whether you can still get them today. You might be surprised by how things turn out.
Annual Fees. Depending on the credit card company, some people who have 0% APR credit cards have had to pay an annual fee for the privilege. Some of these cards have annual fees that range from $15 to $20 or even more.
Late Fees. If a customer had a credit card with 0% APR, you would think they would always pay on time, right? Well, most people don't. So, credit card companies would charge a late fee every time a payment wasn't made on time. The fees range from $19 to $39, which can add up if someone is always late.
Default Rate. Oh, that 0% rate looks good at first glance. If you read the "member's agreement," you'll quickly find out that late payments will not only result in a fee, but also a "default rate" that will raise the annual percentage rate on both existing balances and new charges to double digits! If you are late, you can quickly say "goodbye" to your credit card with 0% APR.
Only for a short time. There are still credit cards out there with 0% APR. Most of the time, they are cards for new cardholders that offer a 0% rate for a limited time, like a year, before a higher rate, usually around 12%, takes effect. Some cards let you move your existing credit card balances to the new card and get a 0% interest rate on those balances. What a great way to save money and cut costs!
Don't worry about credit card companies having trouble making money, even if they offer cards with low or no APR. Since then, rates have gone up, sometimes a lot, making it harder to find a credit card with a low interest rate. Still, there are great deals out there, but you have to know where to look. Searching online for a credit card with 0% APR is a great way to quickly find the best 0% APR offers and compare them.
