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What Should I Know About Credit Cards with 0% APR?

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  • Written By: Tricia Ellis-Christensen
  • Edited By: O. Wallace
  • Last Modified Date: 27 November 2016
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Credit cards with 0% APR are cards that don’t initially charge an interest rate. There are several types. In certain types of these cards, the 0% APR refers only to balance transfers or transferring money owed on a different card to the new card. Other times, the company doesn’t assess an interest rate on any new purchases made within a specific time period. Most of these cards eventually charge interest on any balance owed, and this is determined by the end of the introductory period in which the 0% APR is applied.

There can be some benefit to getting a credit card with a 0% APR, particularly when someone needs to pay off money on another card and is getting thwarted by making high interest payments. Some of these cards can offer great savings, allowing people to pay off debts sooner. It is important to decide whether a balance transfer can be paid off in the introductory period time. If it can’t, it’s valuable to look at the interest rate once the introductory period expires.

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With large balances, a higher interest rate after the 0% APR period ends, means that people may ultimately end up paying more interest than they would have on their old cards. It helps to look for cards with longer no-interest periods; look for those that last at least a year. It’s prudent to do the math — calculating monthly payments and interest thereafter to find out when and if transferring balance to a new card will actually represent real savings.

Some people are attracted to 0% APR cards because they’d like to make a new purchase and pay it off before interest fees are charged. In this case, verify that the 0% APR applies to new purchases too, instead of just applying to balance transfers. Again, a longer introductory rate can be helpful because it gives people a longer amount of time to pay off debts without accruing interest.

It’s still important to understand the interest rate on the card once the introductory period ends. Sometimes the 0% APR looks attractive but ends up charging an unreasonable rate later on. Alternately, some companies make their money in large fees if a payment is a few days late. As with any credit card, it’s valuable to read all the terms and conditions before accepting or applying for these offers. People can find great credit cards with low introductory rates, but will want to avoid those that are using these rates to mask later terms that aren’t the best.

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