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CREDIT CARDS: HOW DO THEY DO THAT?

Admin Manager - Tuesday, October 25, 2016
During the days when the Federal Bank interest rates were at its lowest, back in 2002 and 2003 to be specific, countless credit card providers offered 0% APR credit cards to many consumers. Needing only to pay the outstanding balance, smart consumers were able to charge credit cards up to their limits without incurring monthly interest charges. The question that some people were asking when these cards were at their peak of popularity was this: how do credit card providers make money off of this type of plan? Well, good question! Let’s examine 0% APR credit cards and the way they really work and if they are applicable to you. You just might be surprised at the answers!

Annual fees: 
Depending on the credit card provider, some card holders have been charged an annual fee for the privilege of having a 0% APR credit card. Annual fees for these cards generally range between $15 and $20, sometimes higher.

Late fees:
Every time a payment is received late, credit card providers would apply a late fee. With fees ranging from $19 to $39, it can add up to an enormous amount, especially if someone is habitually late.

Default rate:
That 0% rate is nice on the surface. Read the “member’s agreement” and you will quickly learn that late payments will not only incur a fee but a “default rate” would be charged bumping up the annual percentage rate to double digit figure on existing balances as well as on new charges! If you are late you can say, “bye, bye” to your 0% APR credit card in no time.

Short term offer:
0% APR credit cards are still offered today. New cards for new card holders that offer a 0% rate for a limited period of time, such as twelve months, before a higher rate kicks in which usually is around 12%. Some cards will allow you to transfer existing credit card balances over to the new card and receive the 0% rate on transferred balances. What a great way to cut your costs and save money too! 

Don’t worry about credit card providers having difficulty making money even with low or 0% APR credit cards. Rates have since increased, in some cases dramatically, making it more difficult to find a low-interest rate credit card. Great offers exist, but you must know where to find them. Searching online for your 0% APR credit card is a great way to quickly find and compare the best 0% APR offers available.

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