Terms of the Offer

As appealing as a 0% APR balance transfer offer may seem on the surface, wise consumers will do a bit of investigating before signing on the dotted line and accepting the offer. Some offers may feature a zero percent APR for a very limited (usually around six months or so) period of time, while some may give you this great (free) rate for longer. For consumers looking to pay debt off fast, such as within the amount of time that the balance will be billed at zero percent, these offers are ideal. If you plan to take your time paying off the balance, then make certain that the APR that you will be charged after the initial “welcome” period is not higher than what you are already paying. You must also look at how much it will cost to transfer your balance from your existing credit cards to a new card when determining if a 0% APR balance transfer offer is for you. Most credit card companies will charge some type of fee for transferring the balance to your new card. Take this additional cost into consideration when making your decision. Also look at these possible pitfalls for the offer you are reviewing:

• Many people transfer a balance on a 0% APR credit card and then continue to make new purchases on either the old card or on the new card. This can lead to a never ending cycle of debt. If you transfer the balance over, don’t make any new card purchases until you have paid off the balance in full.

• Check to see if the introductory APR on the 0% balance transfer offer reverts over to a higher rate. Many card companies will revert the account over to what is known as the “cash advance rate” after so long if the balance that was transferred is not paid off within a particular timeframe. This is the same elevated rate that you are charged when you do a cash advance – and can be quite expensive.

• Find out before taking advantage of the offer if you are required to pay an annual fee. A high annual fee can make transferring your balance over less of a good idea if your savings go down the drain with it.

Zero Percent Interest is Not Forever

Keep in mind that credit card companies and banks only make money when you have to pay interest, so don’t ever be under the assumption that a zero percent credit card is going to last forever. But still yet, you want to take advantage of the zero percent APR for as long as possible, so review the terms and conditions of the credit card offer to see that you get a substantial amount of time at zero percent before you start paying interest. Also pay attention to the APR that you will be charged when the introductory period has ended, and if you will be charged interest on any balances that you choose to transfer to the new card. Note: there is one exception to the rule that zero percent interest is not forever. Many card companies will offer you a 0% APR indefinitely on purchases that are paid for within a certain period of time at the end of each billing cycle.

Annual Fees Are For Country Clubs

With so much competition out there, it is hard to believe that some credit card companies are still charging annual fees. But they are – and you don’t want to go with a credit card, even a 0% interest credit card, that is issued by a company that will charge you an annual fee. Annual fees can be several hundred dollars – which can definitely make the savings that you will see from not paying interest look like chump change. Simply put, there’s no need to go with a card that charges you just to carry it.

Perks

Getting rewarded for spending money is important when you are an avid credit card user, and going with a 0% percent credit card that rewards your patronage is a good idea. If you travel, look for a card that features a zero percent interest rate and also gives you airline miles that can be eventually redeemed for a free flight. If you use your credit card to pay monthly bills and then pay the balance off each month, look for a 0% percent credit card that offers cash back. There are always perks that are being offered by credit card companies to keep their cardholders happy and loyal.

APRs can come in different amounts that are usually based on your annual income, as well as your credit rating. If you make a lot of money every year then you will probably receive a very low APR, but if you are making a nominal amount of money annually then your APR will most likely be higher due to possible risks. These risks are associated with the fact that most banks, credit card companies and private financial firms feel that if you do not make a lot of money annually, they will have a hard time receiving their monthly payments. This is why they give you a high APR; so they do not have the risk of a large loss at the end of their company’s fiscal year.

This is why many people who fall into the range of middle class and below have found themselves facing a problem with their debt to income ratio, which could possibly ruin their credit rating if they do not handle the situation with care. For this reason, you should discuss your annual income with an expert in the credit field such as a financial adviser or even a bank officer. You need to make sure that you can actually afford the APR being offered to you and still be able to manage your monthly budget accordingly. You will also want to make sure that you don’t overspend and make large purchases that you cannot afford to pay back within a timely manner.

When the economy is not in the best condition a lot of banks, credit card companies and financial firms lower their required APRs; but do not be fooled, they will still make their money one way or another. So shop with an open mind and make sure to compare. Check with different companies and see which one can offer you the lowest APR and which companies offer better prices. If you are being forced into a high APR, then don’t deal with them, just leave. If you know about some companies which have the time to educate you on the APR and what it will mean for your financial future, though, you could always try them.

When it seems like you are being handed free money through credit cards and private loans it can be a challenge to maintain your composure, so just be careful and educate yourself. You can find out about APRs and what they represent online, through a local library and of course through your financial institutions. But make sure that you understand what is being explained to you; then you will find that APRs are just a component of the financial world and can be harmless if utilized properly.