Needing only to pay the outstanding balance, smart consumers were able to charge 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 generate profits from this type of plan?

Well, that is a good question! Let’s examine 0 APR credit cards and the way they really work and whether if still available to you today they are as useful as they seem to be. Basically, banks make from 0 APR credit cards as follows:

#1. Late Fees
Smart credit card holders always pay before sitpulated payment date however many don’t. And inspite of the fact that having a 0 APR credit card is a fantastic way to eliminate credit card debt many do not make payment on time. Thus, every time a payment is received late, credit card providers clap their hands in glee. With late fee charges ranging from anywhere between $19 to $40, they can make a tidy sum from habitua late fee payers.

#2. Default Rate
In addition, 0% APR rate is attractive on the surface. But on a closer inspection, when you read the small print of 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

#3. Annual Fees
Also, depending on the credit card provider, some credit card holders are charged an annual fee for the privilege of having the 0% APR. In fact, although annual fees for some of these cards generally run from $15 to $20, some charge as much as $100.00 or double digit figures 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.

#4. Short Term Offer
Although, 0% APR credit cards are still offered today, the 0% rate is only for a limited period of time, such as six or twelve months, After that a higher rate kicks in, which usually is around 12%. Some cards providers 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!

Bottom line is credit card providers don’t have any 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. Still, 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.

See also:

Consumer Credit Counseling

Bad Credit Repair

Discover 5 Ways To Avoid Credit Card Late Fees