0% Introductory APR: Golden Opportunity or Quicksand Trap? | CreditShout

0% Introductory APR: Golden Opportunity or Quicksand Trap?

By Kevin / January 16, 2009
0% Introductory APR: Golden Opportunity or Quicksand Trap?


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As the economy worsens, the more and more credit card companies will do to obtain the business of the more creditworthy. The best and brightest of these programs is the 0% introductory APR. Sounds great, right? It can be the best thing to happen to your credit situation or it can be the ultimate downfall, therefore we have a two edged sword here. The reality here is that your spending habits are going to define if such a program will benefit you or not.

Legitimate reasons for wanting a 0% introductory rate include:

  • To consolidate and pay-off high interest accounts.
  • To purchase a high ticket item that you cannot afford up front but CAN make payoff within a certain amount of time.
  • You need a financial infusion to tide you over before you receive your income tax refund.

If you are seeking that 0% APR for the above reasons then you will most likely take good advantage of the zero finance charge and use it to your benefit. If you are only looking to swap debt around from one card to the next and may make a few above the minimum payments but are planning on carrying a balance then this introductory program is not for you. You will only find yourself drowning in quicksand of your own debt and will find it increasingly hard to pull yourself out until finally you are over your head.

In instances where you are finding yourself sinking, a better credit card choice would be one that offers a standard lower interest rate instead of an introductory one in the long run. However, if you are already beginning to sink and your creditworthiness is lacking, finding a low rate card may be extremely difficult, but not impossible to find. The Discover Motiva Card is a very good value for those who must carry credit card balances. To date, it is the only card of its kind that actually pays you for good credit management, which would definitely be a good incentive to keep that sinking ship afloat.

If, however, your credit is in good standing and your reasons for wanting a 0% introductory rate is a financially legitimate, then there are some things you want to take into consideration while making your search:

For how long is the introductory rate?

Most credit card companies only offer very short term 0% introductory rates. You will be hard pressed to find and introductory rate over 6 months. However, the longer introductory rate cards do exist. One example is Blue from American Express which offers an interest rate of 0% for the first 12 months, no annual fee and a rewards program called Membership Rewards Express.

Be sure to check out what the 0% introductory APR period applies to such as balance transfers or purchases and what restrictions there are. Some cards that offer the 0% introductory APRs only offer it on new purchases. Therefore, if you are using the zero finance charge only to help purchase a single high-ticket item, then you are in luck. However, if you want to consolidate or pay off high interest cards and will only be transferring balances then this type card is not for you. A perfect compromise can be found in the Discover More Card which has a 0% introductory APR on purchases and balance transfers, no annual fee and offers an extensive cash back benefits program.

What is the standard interest rate that will apply after the introductory rate has expired?

Ideally, you would be paying off the balance before the introductory rate expired. However, sometimes less than ideal situations arise that may force you to take longer to pay off the balance than planned. In this case, the standard interest rate after the introductory rate expires would be important. Many times, you can sacrifice a lower standard rate for that tempting 0% introductory rate. So be sure to compare wisely.

In the end, you can see where the 0% introductory APR is a great solution to a short-term plan but can also help pull you into deeper debt on an already sinking ship. Search well and choose wisely.

The editorial content on this page is not provided by any of the companies mentioned and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are the author's alone. Additionally, the opinions of the commenters are not necessarily the opinions of this site

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