Will 0% APR Credit Card Offers be the Next Credit Crunch Victims?

Can you remember a time when your mailbox wasn’t flooded with 0% APR credit card offers?  You’ll have to think hard, because its been close to a decade.  Over the past few years, so many trees have been cut down and stamped with bold 0% imprints that if you listen closely, you can hear Al Gore weeping over the matter.  Unfortunately, however, it may be you, and not the former Vice President, weeping if you fail to take advantage of 0% APR teaser rates soon.  Why?  Because the same banks that don’t want to lend money to home buyers at 6% interest rates may soon decide to stop funding purchases of flat screen TV’s, trips to Disney World, and $6 lattes without charging substantially higher interest rates.

While this position may seem alarmist, the history of the credit card contains many pages that do not contain the words, “0% Intro APR.”  In fact, many of those pages don’t even contain the words, “Intro APR.”  In January of 1999, a CNN Money article (see http://money.cnn.com/1999/01/27/banking/q_bankrate/) states that, “In the third quarter of 1998, only 36 percent of new card offers mailed to consumers included an introductory rate.”  And what were those rates.  In describing a “crackdown” on the percentage of credit cards that offered introductory rates, the writer states, “Because all those super-low teaser rate offers, often 5 percent or less, were wonderful for the consumer but lousy for the credit card companies.”  Its hard to think of a 5% APR as super-low, but its time to start contemplating the possibility of this becoming a reality.

Fast forward to 2001.  Same website, similar topic.  In this article (see http://money.cnn.com/2001/03/15/living/q_bankrate/), the topic is introductory rates for balance transfers.  And the idea of a 0% Intro APR doesn’t even get a sentence.  In fact, the leading deals offer introductory interest rates of either 1.9% or 2.9%, plus fees of up to 5% per transfer.  While this is not as high as the lofty 5% rates of the late 1990’s, it is still a good deal away from 0%.

While 0% introductory rates may not disappear altogether, the possibility should not be ignored.  Credit card companies have been tweaking their offers all year long.  Some companies, like Bank of America, have stopped offering 0% rates on purchases with many of the cards they offer online.  Other companies, such as American Express, have decreased the length of time 0% rates apply.  For example, Blue from American Express® has offered a 0% intro APR for up to 15 months since 2005.  Recently, the term was reduced to “up to 12 months.”

So should you panic?  Not yet.  However, if you are carrying a balance on a credit card with a 10% or higher interest rate, you may want to take advantage of a 0% APR balance transfer sooner rather than later.  The same holds true if you intend to make new purchases that you will not be repaying in full every month.  You can save hundreds on interest with a 0% intro APR now, but three months from now….

To learn more about current 0% APR credit cards, please visit the main section of SmartCreditChoices.com.  At our main website, you can compare close to 100 current offers and apply online for a money saving, 0% APR deal.