How can credit card companies offer zero APR credit cards and still make money? Well, now that interest rates have gone up they don’t so much anymore. But zero APR cards are can still be found if you look, and the Internet is probably the best source. So what’s the catch? There are several:
– Most zero APR credit cards offer zero APR for a limited time, normally no more than a year
Carefully read the fine print to find out exactly how much interest you’ll be paying later. Some people try to transfer their entire credit card balance to a new zero APR card every year in order to extend their “limited time offer” indefinitely, but credit card companies are getting wise to this maneuver. Nevertheless, getting a zero APR credit card can be a smart move as long if you read the contract and follow the rules.
– There is usually a an annual fee.
$20 is no problem, but beware triple-digit fees just to get zero APR for 12 months.
– Zero APR card issuers make money from suckers.
So don’t be one. Late fees are high, so pay on time. How much of an interest rate is zero APR plus a late fee of $25? You can do the math yourself. The card issuer might also jack up the rate for late payers (they call it a “default interest rate”). And a default interest rate may apply not only to existing balances but future charges as well.
Zero APR credit cards can be great value if there is a reasonable interest rate after the limited offer period ends and as if you pay all your card bills as they come due. If you do that, then your low interest rate will in effect be paid for by the suckers who snatch up these cards and then don’t pay on time.