• Business and Finance
• Family
• Computers and Internet
• Auto and Trucks
• Education
• Health
• Hobbies
• Home Improvement
• Legal
• Marketing

• Home
• Arthur's Articles Home
• Browse Categories
• Browse Authors
• Submit an Article
• Search for Articles

Home » Business And Finance Articles » Understanding 0 Apr Credit Cards

Understanding 0 APR Credit Cards

A 0% APR is essentially a credit card offered by credit card companies to their consumers with an 'annual percentage rate' (APR) of zero percent. However, this rate does not exist forever, and after a period that ranges between three to twelve months, credit card companies begin charging higher rates of interest. Therefore, the major factors to be considered are the duration of the no-interest period, and what would be the APR rate after the offer ends.

Advantages of owning a 0% APR Credit card:

Though 0% APR credit cards have a few catches, they can also prove to be advantageous for its users. The best way to assess these cards is by actually using one. If you pay off the monthly balance regularly, then the rate of interest will not be a major concern. Some of its main benefits are as follows:

- Cut down the interest rate: A 0% APR credit card is popular among users with heavy outstanding card balances. It helps them to slash the rate of interest incurred upon their debt.

- Travel benefits: A 0% APR credit cards offer travel benefits to its users. You could profit from this card if you travel by air frequently. Most companies provide bonus air mile benefits on APR credit cards. This could be as much as twenty-five thousand miles, merely by signing up and making your first purchase from this card. The travel facility could also be used for hotel rooms, meals and other additional alternatives. It also provides you with free gas discounts and rebates in purchasing a car.

- Cash back or reward benefits: Low APR credit cards also provide a system where you could get back a percentage of your purchases. You could get a reward of five percent for certain kinds of purchases you make.

- Paying off debt: Transferring your credit card balance that needs to be paid off to a new credit card with 0% APR would be a better money- saving solution, than holding on to the old card with a high rate of interest.

- Start up a new credit history: A 0% APR credit card can be used to establish a new credit history for a cardholder with a previous credit card debt. These cards curb the credit card usage, and initiate the necessity of spending within the budget. However, it might not be issued to people with a bad credit history.

Limitations of 0 percent interest APR credit cards:

A 0% APR credit card often comes with strings attached. Some of the major limitations are as follows:

- Usually, a 0% APR credit card offers the no-interest benefit for only a limited period, such as six months to a year.
- It might not allow you to transfer balances from high interest credit cards during the introductory 0% offer period.
- It could charge expensive fees for the process of transferring the balance.
- Some of these credit cards bear very high penalties for late payments, and automatically transfer you to an inconsistent APR rate.
- It often charges a very high interest rate once the initial offer period expires.

Therefore, although 0% APR credit cards may seem too good to be true, they do have a number of real advantages. While these promotional offers by credit card companies are useful, they need to be taken up judiciously.

And here is another random article you might be interested in...

Borrowing on a Credit Card

One of the easiest ways to borrow money of a financial institute is to use a Credit Card, available from all banks, building societies, and other financial organisations. The choices available are enormous, with a wide variety of interest charges, annual charges, loyalty schemes, and bonus points available. However there are two broad areas that you should look at:

Annual Interest Rate

Firstly if you do not intend to pay off your Credit Card bill at the end of each month, then you should look at the Annual Interest Rate (APR), this rate is typically between 13-17% at the moment, and you should be looking for a card that offers as low an interest rate as possible. You should also bear in mind that you are charged much higher rates of interest than other forms of borrowing money, so if you do not intend to pay of your bills for a long period of time, then you should seriously consider a different form of loan that is less expensive.

Extra Benefits

On the other hand if you do intend to pay off you credit card bill at the end of each month, then you should be more interested in the loyalty schemes that are on offer. These vary from being awarded points every time you purchase something (these points can than me used to purchased gifts or air miles etc), to simply being given 'Cashback' on everything you buy (typically 0.5%-1% of your purchase). You should also look at the level of service that your card company offers. They are obliged under law to offer certain protection to the consumer, but often they will increase this protection with other guarantees. Some offer extended warranties on electrical goods, extra travel insurance when you are on holiday, accidental damage insurance for any goods you buy, and even free commission on cash withdrawals when abroad.

Also some companies charge an annual fee for using their card (especially business credit card accounts), so these fees should be weighed up against the cards benefits.

Even if you usually do pay off your credit card bills at the end of each month, when you open a account you may be offered 6 months interest free credit. This is often an excellent way of saving money as you are basically given an interest free loan for 6 months. It is even more useful if you are allowed to transfer some credit card debt from a different company into the interest free offer. However there is a danger of becoming trapped in a bad debit cycle here, transferring your debt from card to card until it is completely unmanageable. The best advice is to make sure you always have enough money in the bank, or in a savings account, to pay off your debt when you are taking advantage of the interest free credit period. That way you benefit from earning interest on your savings in your bank, but as soon as the interest free credit period has expired, you can pay the entire bill off without being stung for high interest charges.

So to summarize

If you are not paying off your monthly credit card bills, look for a card that offers a low interest rate

If you are paying off your monthly credit card bills, looking for additional card benefits

Interest free credit periods are good news for saving money, but beware of being caught in a debt spiral

Credit Cards are an expensive way of obtaining a loan or borrowing money, and you should investigate other cheaper forms if you intend to borrow money in the medium to long term