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What You Need to Know About 0% APR Credit Cards


									        What You Need to Know About 0% APR Credit Cards

The annual percentage rate (APR) on a credit card is the percent of interest that
compounds on top of the money you owe for your purchases. Percentage rates can vary
greatly and can even change based on your spending habits. Several credit cards offer 0%
APR as an introductory rate. These introductory rates can last anywhere from a few
months to up to two years.

Introductory Rate Periods

Cards that have a 0% introductory APR, have varying interest rates after the introductory
period is over. These rates can vary from an average rate of about 16%, to an extreme
rate of over 25%. It's important to consider what your interest rate will be when the
introductory period ends whenever you are considering a 0% APR credit card.

A high interest rate can cause serious problems for those not ready for the sudden change,
particularly if you are someone who carries a balance from one month to the next. Many
people get trapped with high interest on their card when the introductory rate ends, not
realizing that their total credit card balance is often charged at the higher rate, not just
their new purchases. If a balance is not paid in full, the retroactive total on the balance
can be extremely high. Consider a person who made $10,000 worth of charges during
their 0% introductory rate. If on the day that the introductory rate expires a 25% interest
rate kicks in, that $10k balance will now have $2500 in interest tacked on. This additional
interest and amount owed is often charged against the credit limit on the card.


There is the rare exception to the rule of the 0% introductory rate. There are a few
business cards, like the Chase Ink Bold card, that carry a 0% rate permanently, rather
than just as an introductory rate. These cards often have a large annual fee and require a
very high, near perfect credit score to obtain. The 0% interest rate never expires as long
as the card holder meets the terms to qualify for the card.

Spending Strategies

When an individual is approved for a credit card with a 0% APR, the card company is
required to tell you how long that introductory rate will last. Credit cards with 0% APR
are fairly common and can help build credit while helping you not pay interest on the
purchases you make. A common strategy to gain some credit with a 0% APR card
involves charging a large purchase that you had intended to make with cash. By making
that purchase with credit and knowing how long your 0% introductory period is, you can
make timely monthly payments, and pay the balance in full within the introductory
period. This helps to build your credit without racking up any debt.

Balance Transfers
Credit cards with 0% APR can be used for more than just getting an interest-free
repayment plan on purchases you make today. Several cards that carry a 0% introductory
rate on the interest for purchases also have 0% interest on balance transfers. This can be
used to transfer an existing balance from a card that has a high interest rate to the 0%
APR credit card and save you some money while you focus on repaying your debt.

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