A 0% credit card sounds to good to be true and to a large degree it is. However, it is possible to obtain a card that charges 0% interest for a limited time. The catch is that after a set period the introductory rate of 0% ends and the standard APR is charged. Any outstanding balance on purchases made, whether during the introductory period or not, now become subject to the standard rate.
The headline for a 0% on purchases offer always looks very inviting. However, it is very important that the consumer understands what the offer is all about. The 0% interest only applies for the length of the offer period. Some people confuse this with a lifetime interest of 0% on purchases made during the offer period. There is a subtle but hugely important difference. It means that to get the maximum benefit of the offer the consumer should make their purchases as early as possible. There is not much to be gained by making the purchase in the final days of the offer.
The typical length of the offer period is 6 months, although that can and does vary. It is rarely much less than 6 months and occasionally a credit card company will promote a 12 month period, although this is becoming increasingly rare.
As we mentioned above when the period completes the outstanding balance of the purchases made will revert to the standard rate of the card. The new rate does not necessarily apply to the whole balance, as there may be a balance transfer offer that still applies. The completion of the term is something that the cardholder should be very aware of. They should make provision to handle this outstanding balance in some way, by either paying it off, obtaining a consolidation loan or transferring the balance to another card.
Even when the offer period is current not all transactions are subject to the introductory rate. The obvious types of transactions that are exempt from the 0% rate are cash withdrawals and interest charges. Cash advances are normally charged at the standard rate plus a handling charge and we are not aware of any credit cards that charge 0% on cash advances.
In summary the benefits of a 0% credit card are very obvious. However, the dangers are less so and that is the point of this article. While the 0% rate apply then is sensible to take advantage of it. The key thing is to have a plan of action for when the 0% rate finishes. If you do then it is possible to use these offers to your advantage.