Credit card companies expect to attract new customers with their 0% APR credit cards. If you are planning to make credit card purchases or pay expenses which you had not anticipated a credit card with 0% APR is the best for you. Check when the rate will change to Regular APR so you can plan to pay-off the balance before the end of the introductory period or move to a 0% balance transfer credit card if you intend to carry on the balance. Otherwise, you will have to pay the interest which depends on your creditworthiness.
How banks make money on zero percent credit cards
Banks do not lose when you pay your balance within the promotional period because they earn money on transaction fees from the retailers for processing your payments. The banks do not offer zero percent APR credit card offers for nothing even when it is not from your side. When you make an application for zero percent APR credit cards the banks refer you to online vendors for your shopping and in return they earn a portion of profits from the vendors which cover the overhead costs necessary for maintaining your account. You also gain by buying at discounted rates from the vendors because of the bank referral.
Credit card companies expect to lure you to their other offers on travel and retail cards earning finance charges on these cards. They also expect you to spend more on purchases than you would have spent otherwise and this way they earn more on transaction and interchange fees.
Have a financial plan before committing yourself because the promotional offer will end sometime and the regular rate will set in. choose a 0% APR credit card when you intend to make large purchases and when you have unexpected expenses to pay. The offer will save you substantial amounts of money and you should jump at the opportunity with a good plan. Calculate the monthly payments you will be required to pay before the 0% introductory period ends using credit card pay-off calculator and see how you will benefit.
Banks intend to earn finance charges from credit card balances and you will pay a higher APR at the end of the promotional period if you will not have paid-off the entire balance. The longer the teaser period will be the higher the APR rate will change to in most instances. This way the bank will earn finance charges on the balance on the credit card thereafter. If you plan well you can save significantly when you transfer large interest earning credit card balances and pay within the 0% introductory period.
You should read the credit card terms and conditions carefully on application before you sign-up and check the exact date the offer will end so you are not caught unawares. Read the application form fine print carefully because some credit card companies charge hefty penalties if the customer fails to clear the balance within the teaser period. The charges can be so high that it will cover the interest rate on the entire period when you did not pay interest on the zero percent credit card offers. To be on the safe side search our tables and make sure you choose the credit card that will charge interest on the balance that you will have after the promotional period and not during the entire period when you had the card.
Look for 0% APR offers which will allow you to consolidate multiple balances into one monthly payment so you can pay your debt fast.
Maintain a good credit score
Your credit score is affected by all lines of credit. When you cancel an old credit card you cut-off part of your credit history and you might be required to pay cancellation fees. The credit score is also affected when you use more than a certain amount of credit. All this will affect your credit score which you will need when applying for a mortgage, loan or auto loan. You should shop for the best credit card that will not affect your credit score negatively but will help you maintain a good credit score.