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CREDIT CARDS: A WAY TO ELIMINATE DEBT
It is interesting to note that what started off as a marketing gimmick has now become an almost permanent part of the credit card industry in America and today 0% APR credit cards can, in fact, play a significant role in helping a person reduce or get out of debt.
What is a 0% APR credit card?
APR is the annual interest rate known in the industry as the “Annual Percentage Rate”. It is a reflection of the cost of credit. In the old days, everybody paid a standard APR based on bank rates (it was usually about 18%). The use of low APR came with the emergence of the Monoline banks. These were banks that only issued credit cards and did not take any deposits or issue conventional loans. For their business model to work well, large numbers were important for these breed of pioneering bankers and credit cards issuers so low APR teaser rates were successfully used to lure as many new card users as possible.
The gimmick seemed to have worked so well that today it is difficult to find a credit card company that does not offer some type of incentive APR during the first 6 months or one year. The more popular credit cards offer 0% APR for the first year.
Usefulness of a 0% APR credit Card in reducing debt:
A 0% APR credit card can be extremely useful for somebody who wants to reduce their large credit card debt. For instance, if you have a credit card debt that remains at about $10 000 and the APR is 20% then you will end up paying a whopping $2 000 in interest payments alone. With a 0% APR credit card, the $2 000 could all go towards reducing that crippling debt. It is, therefore, clear that 0% APR credit cards can offer much-needed financial breathing room for somebody in a serious credit card debt situation.
Consolidation or transfer necessary to benefit from 0% APR credit cards:
Transferring a credit card debt or credit card debt consolidation are all-important first steps that will need to be taken before a person in deep credit card debt can enjoy the benefits of a 0% APR credit card. The objective here would be to have all the person’s outstanding debt payable to one credit card company and at a 0% APR rate.
The importance of 0% APR credit cards in helping an individual or business to get out of credit card debt cannot be understated.Although many potential card users place a lot of importance in being able to obtain a 0% APR credit card, the truth of the matter is that it is only attractive and beneficial to two groups of people. Firstly, persons able to settle their credit card balances on a month to month basis to whom the 0% APR rate means that their cost of maintaining a credit card is very minimal. Secondly, those who have a lot of debt also benefit because the 0% APR credit card greatly assists them in their efforts to reduce their debt.
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