If you don’t have a credit card with a 0% APR, now is the time to get one. With lending for housing and cars drying up, it is a near miracle that credit card companies are continuing to offer 0% interest rates on purchases and balance transfers. However, these offers may soon dry up faster than you can say credit crunch.
In a moment, we’ll explore some of the cost benefits of using a 0% credit card. First, though, we’ll take a look into the not so distant past. Our first stop is 1998. The dot com bubble had yet to burst and the economy was humming along. However, if you wanted a 0% credit card, you’d be hard pressed to find one. In fact, only 36% of mail offers contained special introductory rates and many of those were in the 2.9% to 5% range. Getting a 0% APR wasn’t an option.
In 2001, with the dot com bubble popped and the economy reeling, you might have been able to pull down a 1.9% or 2.9% APR on balance transfers, but that would have required a bit of luck. While the competition between credit card companies was strong, the 0% APR was still a rarity.
Much of this changed in the early part of this decade. Since 2004, nearly every credit card company has rolled out 0% deals. However, these deals were funded with the easy money that fed sub-prime mortgages and loans for 12 mile a gallon SUVs. Today, the credit world is changing rapidly. And consumers are not likely to benefit from this.
In 2008 and 2009, a number of credit card companies pulled back or altered the durations of introductory rates. Many major issuers now advertise a, “0% APR for up to 12 months,” but only grant the full 12 month period to those who have very high credit scores. Those who don’t have scores in the mid-700’s are often approved for a credit card, but granted a 0% APR for 6 months instead of a year.
American Express, for example, had offered a 0% APR for up to 15 months with its Blue card. By the start of 2010, that offer was reduced to 0% for 6 months.
The savings a 0% credit card provides can be mind-blowing, especially when it comes to balance transfers. Here’s a prime example. If you carry a $5,000 balance on a credit card that charges a 13% interest rate, you’ll spend in excess of $600 on interest over the course of a year. By simply taking advantage of a 0% balance transfer, you can keep that $600 in the bank or use it to pay down your debt.
Unfortunately, the 0% APR party may be ending soon. I’ve received a number of emails from concerned visitors of Smart Credit Choices that share a common theme: should I apply for a 0% card now? My answer, put simply, is yes. Its not an optimistic position to take, but when it comes to protecting hard earned money, the best option is to provide oneself with a safety net. And right now, the best safety net is a 0% APR.
For more information on available offers, please refer to either the 0% APR balance transfer or 0% APR section of Smart Credit Choices.
Bank Rate Monitor for CNNfn.com (1999, January 27). "Card-hopping gets tougher". Retrieved October 1, 2008, from http://money.cnn.com/1999/01/27/banking/q_bankrate/
Lazarony, Lucy (2001, March 15). "Balance transfer traps". Retrieved October 1, 2008, from http://money.cnn.com/2001/03/15/living/q_bankrate/
