You’ve all seen these 0 interest credit cards and low-interest credit card offers. They arrive in your mailbox regularly. In fact, I received one yesterday. Although this particular card was sent to my business and is a business card, similar mailings are currently being sent to consumers.
The Capital One Spark Business card promises $0 annual fee, 0 percent intro APR and a one-time bonus of $100. But that was just on the envelope. When I opened it and found the nitty gritty information, the rest of the story turned out to be a bit different. Yet, kudos to Capital One for including the information the CARD Act requires even though those requirements don’t extend to business credit cards.
In the Schumer Box, named after Senator Charles Schumer who spurned the legislation requiring that credit card terms be clearly stated in a credit card company’s advertising, Capital One lists no annual fee and claims to be one of the 0 interest credit cards. But in the Schumer Box you’ll usually find the APRs for different transactions, the number of days in the grace period, annual fee, transaction fees and penalty fees.
On the Capital One Spark card you don’t get the $100 one-time bonus just for signing up for the card. Instead you earn that $100 only after spending $500 on purchases within the first three months of having the credit card.
But the focus of this post is 0 interest credit cards and introductory rates, or any other low-interest you’re offered. Introductory or intro being the key word. The 0 percent rate only lasts until May 2015 and it only applies to purchases. Say you’re lucky enough to receive this card sometime in October of 2014, you’ll not pay any interest on purchase for eight months.
Then what happens? If you’ve not paid that balance down to zero by the end of the May- 2015-billing period, your APR will be 10.9 percent, 14.9 percent or 18.9 percent, depending on your “creditworthiness.” And by the way all those rates are variable APRs.
Before shopping for a low APR card, examine how you use credit and how you plan to use it in the future.
Most of the low-interest intro cards don’t charge an annual fee and also don’t come with much in the way of rewards. Low-interest credit cards, however, make the ideal tool if you’re planning on making one major purchase in the very near future and you plan to definitely pay it off before the introductory or promotional period ends.
Often these credit cards with a 0 percent teaser rate present you with a good opportunity to transfer an outstanding balance from another card. But that’s only if you pay the new card off within the promotional period.
If you have a desperate financial need, using a credit card with a 0 percent intro APR makes a much better solution than selling a structured settlement or applying for a payday loan, according to the professionals at a structured settlement purchasing company Strategic Capital (www.strategiccapital.com). Then you can repay the credit card with your structured settlement payments if that’s something you have.
Think seriously about what you can and can’t do. If you know that chances are good you won’t be able to pay off the balance on the 0 percent card because the introductory rate only lasts for four months, then it’s probably not the right card for you. You may very well get dinged with a whopping variable APR rate of 18.9 or even 22.9 percent after that.
But if you know you can pay off the balance on your old card within a year and it has a fairly low 10.9 percent interest rate, then stick with the old one.
Call the customer service number on the back of your current credit card. Tell the representative that you got this terrific offer from (brand-name credit card company) in the mail. Say something like “I’ve been your customer since ___ (how many years) and I’ve made my payments on time. I’d like to keep on doing business with you, but this offer is hard to turn down. Would you be willing to match it?”
Never apply for a new credit card while you’re in the process of buying a home or a car.
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