Credit Cards

Does The 0% APR Credit Card Really Exist?
Doug Smith

Defined Tag: 0 APR Credit Card.

Is there really such a thing as a 0% APR credit card? Can consumers really obtain bank cards with zero interest rates? Can card companies make money offering such cards to consumers? The no-interest card is one of those things that seems too good to be true, so let's take a look at the reality behind it.

Regardless of the state of the economy, 0% Annual Percentage Rate (APR) cards really do exist. If the banks that issue charge cards make their money on finance charges, and these zero percent cards have no finance charges, what is the incentive for charge card companies to offer a 0 interest rate?

There are two reasons why banks issue plastic with zero interest. The first is to get more customers. The 0-percent card is a powerful lure, and few consumers can resist the urge for a card with no finance charges when filling out a card application. Charge card companies also offer rewards cards, such as cash back, rebates, or even frequent flyer miles. However, the lure of 0% APR is sometimes too good to pass up.

Consumers need to be aware of reason number two. The zero-percent APR typically lasts only 6 months! That's right - consumers with no-interest charge cards can use the cards for free for the first 6 months. The 6-month countdown begins when the customer activates the new charge card. At the end of the half-year period, an interest rate will apply. If you didn't read the complete cardholder agreement, however, you might not know this, or even know how much the later interest rate might be.

Consumers like to get no interest cards to consolidate high interest debt from other credit accounts. They then have 6 months to pay off the consolidated debts before monthly finance charges begin to apply. The card-issuing banks want the customer to have as much money on the 0% cards as possible when the free period ends. They also want the customer to have become familiar and comfortable with using the free interest card as much as possible during the beginning months. These banks hope that the zero interest card has become too convenient to give up after six months of use.

The answer is yes, a 0 percent interest rate charge card really does exist. Be aware, however, that the miracle of the 0% APR credit card only has a 6-month lifetime.

This article is Copyright 2009 by Doug Smith. All Rights Reserved Worldwide. Unauthorized Duplication Prohibited. For Entertainment Purposes Only. Not Intended As Financial Advice. Consult Your Own Financial Professional.