The Real Deal Behind 0% APR Offers

Creditors use the 0% APR as a marketing maneuver to entice prospective debtors to their offer. This offer is good usually for the initial six to twelve months following account activation and is basically free money. But like anything, 0% APR has both its pros and cons. Through a careful analysis of both sides, you will be better equipped to determine if 0% APR is right for you.

Obviously, the good part to the 0% APR is the rate itself. At first glance, it seems odd that credit card companies would be willing to give away free money. In reality, as people are often foolish with their finances, the credit card companies will earn much more money in the long run, as the offer hooks new credit card holders. From the time you receive your credit card, you will have a very low rate, as much as 0%, and not have to worry about interest charges for the first six to 12 months. You might think of this as a honeymoon period with your new card. Compound this with a no annual fee credit card, and you can save a lot of money during this period.

The downside to the 0% intro APR is when the offer ends. The credit card issuer will no doubt attempt to retrieve their deficit from the introductory period. In response to this, they will most likely raise the interest rate higher than normal. So at the end of the day, it is a race to try and pay down your balance in time. After the introductory offer expires, the remaining balance will be transferred to your next months bill, and you will have to pay the higher interest rate quoted by the company. At this point it becomes just another high interest rate credit card, tempting you to spend additional money.

If you think you might have difficulty with paying down your balance before the introductory offer ends, you better think again. The interest rate you're left paying will be more expensive than simply using any low-interest credit card.