Credit card providers in the US have been fiercly competing with each other offering two very attractive offers with a headline rate of 0%. Generally, these 0 APR credit cards are either introductory purchases offers, balance transfers or a combination of the two.

This article examines how to get the best out these types of card and the things that the credit card companies wish you will do and therefore the things to avoid at all costs. While some believe that these types of card will soon be a thing of the past, as they cost the credit card companies too much profit the more consumers get wiser and avoid the pitfalls, they seem to be here to stay.

A balance transfer credit card is basically an offer of either a 0% interest rate or very low interest rate for a set period of usually six to twelve months. Generally, the typical period is 6 months although there are variations on this and there have even been some low rates set for the lifetime of the balance. However, these are becoming rarer and rarer.

Once, the offer period expires, the outstanding balance reverts to the standard rate APR on all purchases. This is very critical, as at this point the credit card company hopes to reap profit from the laid-back consumer. The company can begin to earn money on the balance.

A 0% APR purchase offer credit card has many similarities to the balance transfer offers. The introductory rate and period are usually 0% and 6 months in the same way as the balance transfer. In addition, once the period expires the outstanding balance is subject to the standard rate on purchases. It is an important point to note that the this “fantastic” introductory rate does not apply indefinitely to all purchases, but only to those made duration of the introductory period.

It is not unusual for credit card companies will offer both the balance transfer and 0% on purchases on the same card. When this is not the case it is wise to keep balance transfers and purchases separate. This is because the balance transfer portion of an outstanding balance is likely to be paid off quicker by the smart consumer and elimiante debt than the standard rate purchases. An increasing portion of the balance will be subject to the standard rate and the balance transfer portion will decrease at a faster rate. It is possible for a savvy consumer to obtain a credit card with a balance transfer and a separate low interest credit card for any purchases to be made. That way the benefits of the offers are maximised.

To conclude, the balance transfer and 0% purchase offers can be of great benefit to the consumer provided that the consumer understands how to use the offers to their advantage. A degree of good discipline is required in managing repayments. Also, cardholders should be aware of any charges or penalties that may cause the offer to be cancelled. Armed with this knowledge then these cards can be made to work for the smaart consumer, but remember that when comparing credit cards to pay close attention to the typical APR, which is, always stated where US credit cards are promoted. This is required by law.

See also:

Definition of 15 important credit card terms

0 APR Credit Cards – How Banks Still Make Money With It

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