Credit card companies are doing things they haven't done before to get ahead of the competition. There are a lot of really appealing incentives being given. Because there is so much competition, consumers can get better deals. But before committing to one credit card, you should still think about it carefully.
The annual percentage rate, or APR, is the one that is most often used in marketing for credit cards. APR tells a credit card user, given a certain principal amount, how much interest they need to pay. The deal is better if the APR is low. Some companies may even offer 0% APR, which means that borrowers only have to pay back the amount they borrowed.
This sounds too good to be real. Banks are not charities; they are businesses that make money. They would definitely find other ways to make up for the lost money that 0% APR would cause.
Most of the time, these ways are hidden in the small print. A customer could get into financial trouble if they sign up for a credit card with 0% APR but don't read and fully understand all of the terms and conditions. The law only says that all fees and other terms and conditions have to be written down and posted for customers to see. Banks do not have to write these in bigger letters.
These 0% APR offers are just ways to get people to buy things. They don't last very long, usually only 90 days to a year. And after that introductory period is over, you would have to pay a high APR on everything you bought. You would definitely lose the money you saved during the time when the interest rate was 0%.
Also, if you read the fine print, you'll find that most of these 0% APR offers may not apply to balance transfers. So, if you want to take advantage of this limited offer, you would have to use your new card to buy something new. This condition might be fine for people who just got their first credit card and don't already owe money on cards from other banks. But for most of us who want to keep our credit card interest rates low, this condition doesn't sound good, especially if we find out about it after we've already signed up for the card.
The other way banks make up for the 0% APR is by charging very high fees for the application and the loan itself. They might even charge transfer fees, and if you don't pay off your balance on time, the 0% APR offer is void. For these late payments, you might have to pay a higher APR.
On the small print, you can also write a lot of other things. On some application forms, it may say that the bank could send you a different card if you don't qualify for or can't get the one you first asked for. Most of the time, these new credit cards won't have the 0% APR offer that you want.
There are also times when 0% APR deals are only available for balance transfers. When you've paid enough to cover the transferred balance, your new card purchases will have a high APR.
The credit card with 0% APR is not as great as it seems. If you read the fine print, you could avoid the marketing tricks that were used. If you know how to avoid these bad conditions, you'll be able to get the most out of these credit cards with 0% APR.
