0% Interest Credit Cards - Are They Really Fact, Fiction, Or a Trap?

There are many credit cards with a 0% APR being touted on the news, almost on a daily basis, but are they really telling you the whole story?

As interest rates steadily climb, an increasing number of consumers find themselves leaning towards 0% interest credit cards in an attempt to keep their debt to a minimum, while still enjoying the benefits of a line of credit. The question being raised by many, who are skeptical, however, is what they aren’t being told about these alleged miracles of modern credit.

On the surface, a card with a 0% APR looks like a fantastic opportunity. 0% interest credit cards? Yeah, I’ve got one. Doesn’t everyone? The opportunity to shop without tallying up huge amounts of interest is an opportunity that can appeal to even the most tight fisted of consumers.

To sweeten the pot, many credit card companies will throw in other “benefits” along with their stellar interest rates. 0% interest credit cards and the opportunity to earn double frequent flyer miles after your first $200 in purchases - Free balance transfers - Reward points, and the list goes on. Frankly, they will try almost anything to attract the unwary consumer.

READ THE FINE PRINT! These offers are not all they appear to be! First and foremost, you usually aren’t going to be getting a credit card with a 0% APR. What you’re going to get is one with an introductory period of 0% APR. Usually, this means that after the first thirty days your interest rate is going to fly up -often times in excess of 20%. That’s how companies manage to keep a full clientele despite their outrageous rates. They lure them in, and by the time they realize what’s happened, they’re already paying on a huge balance that they couldn’t afford in the first place

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Late payments can also have a dramatic impact on your APR, although that usually affects the permanent APR more strongly than it does the 0% interest. If you have a late payment, your interest rate can go up as much as 10%. Miss a payment? No problem – up goes your interest rate. You’ll be paying on that bill for the next twenty years if you’re not careful - which presents another problem associated with 0% interest credit cards.

It’s very easy to get caught up in the excitement of a 0% interest credit card. That excitement usually leads to an expensive lesson on retail therapy - perfectly acceptable during that 0% introductory period but hard on the pocketbook when the interest rate goes flying back up. Suddenly you find yourself holding the bag for hundreds of dollars of interest on purchases you really didn’t need and never would have made otherwise. Banks and others gear these special “benefits” to young couples, and the elderly, who can least afford it. The author was a banker for over 25 years, and is well aware of the pitfalls of these types of promotions, as well as the problems created with too loose credit in general.

The bottom line is that you should approach 0% interest credit cards with caution, and be certain that you understand what you are getting into. If it sounds too good to be true, it probably is. There is no Free lunch! Don’t allow that introductory period to convince you to sign on the dotted line. Judge the merits of a 0% interest credit card on the same criteria that you would anything else. Don’t let that temptation place you on a buying spree just because you’re promised no interest.