A 0 APR credit card or 0 annual percentage rate credit card is a card that does not charge interest on borrowed money. An important note is that no credit card is actually permanently a 0 APR credit card. Instead many credit cards offer 0 APR for a limited period of time such as 6 or 12 months. Originally credit card companies offered 0 APR introductory rates to get customers to try their cards. Today people often get 0 APR credit cards to temporarily borrow money for free.
Uses for 0 APR Credit Cards
The most common use for 0 APR credit cards is to manage other credit card debt. Often a person will have a credit card balance that they are having difficulty paying. The interest rates on this debt may be extremely high and the highest payment the person is able to pay barely covered the interest on their debt. To solve this problem a person can often transfer their debt to a 0 APR credit card for free and get the 0 APR on that debt. By avoiding the interest payments, this person's entire payment goes towards paying off their credit card debt. Hopefully during the introductory period this person will be able to pay off their entire balance. Another use for 0 APR credit cards is cash flow. Small businesses often need cash to maintain operations while waiting for payment on a large sale. The same may go for personal cash flows. For example, a person may be interested in putting a swimming pool in their back yard and paying for it with their yearly bonus. Regularly this person would have to wait until December to be able to pay for a pool. With a 0 APR credit card the pool could be enjoyed the summer before it is paid for.
0 APR Credit Card Cautions
While not paying interest certainly sounds good and can be a great tool, 0 APR credit cards have drawbacks. Just remember, no one is willing to loan money without expecting something in return. This goes for credit card companies as well. While a 0 APR credit card may not charge interest temporarily, it will most certainly charge interest after. The 0 percent interest is considered an "introductory rate," or a rate that will only last for a specified time period. After the introductory period the interest rate will often be extremely high. Very regularly people don't pay off their balance in full during the introductory period and are left with debt at the regular, sometimes high interest rate. One more important factor to look for with 0 APR credit cards is transfers. Frequently credit card companies will not let cardholders transfer balances at the 0 percent interest, on top of this they may charge an expensive transfer fee. To avoid these credit card tricks always read the full terms of the credit card and make sure to know the credit card's regular interest rate. Also always remember to read the footnotes every time there is an asterix on the written offer.
0 APR Long Term Effects
While 0 APR credit cards can be effective, they can also get people into financial trouble. Reading through the details of the card agreement and being careful to pay off the whole balance before the introductory rate ends are the best ways to avoid these issues. By being careful and taking advantage of 0 APR credit cards, temporary financial shortfalls can be avoided allowing people get to the next step towards financial stability.