Almost every day, we get pre-approved credit card offers in the mail and they all claim to have a 0% APR. This is very tempting and makes you think of shifting credit cards or acquiring a new one. You have to admit that it is always at the back of our minds. But is it always the best thing to do? Should you contact that persistent credit card provider and avail of their 0% APR? It may sometimes be the best move, but not always.
There are a lot of things to consider when getting a credit card other than the APR. But in order to understand this, we must first define what an APR is:
APR stands for ANNUAL PERCENTAGE RATE; it stands for the yearly percentage that the bank gets from your account balance. For example, you have an outstanding balance of $30,000 in your credit card account and you have an annual APR of 12%; this results into you paying a rate of $3,600 for that entire year. If you are availing of a 0% APR, this means that you don’t have another fee to pay each year.
It sounds well and good. Who doesn’t want to get out of paying a yearly percentage fee? No one! The trouble here is the fact that there is no such thing as perpetual 0% APR rate. This is only an introductory offer that normally lasts from 6 months to 15 months depending on the credit card provider. After that you have to start paying the required regular APR and regular APRs range from as little as 10% to whopping 20% or more.
Now you’re saying to yourself “I don’t mind paying the regular rate as long as I can avail of the 0% APR period. Be careful, look into the credit card plan offer carefully before deciding to shift or getting a new card. Consider the following things:
• The Regular APR – look at the regular APR of your current credit card and the new one you are planning to shift to. Make sure that the new one’s regular APR is equal to or lesser than your current card’s. If it is greater, then shifting cards may not be so wise, because after you have availed of the introductory 0% APR you are then stuck paying for a greater APR than before.
• The Duration of 0% APR – there is no such thing as a perpetual 0% APR. Most 0% APR offers only last for 6 to 15 months, after that you have to start paying the regular APR. Think of it this way, if you are only getting a 6 month period of 0% APR and then you have to pay a regular APR higher than your current one, you will end up at the loosing end and it is best not to shift. BEWARE: if you are offered a perpetual 0% APR rate, find out as much as you can about the offer and the company promoting it. It could be a fraudulent offer or the company could be routing what you are supposed to pay to another fee form. You could end up paying more than you bargained for.
Consider also all the other fees associated with your credit cards and compare them to one another so that you know you are making the right choice.