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When is 0% APR a Bad Deal?

Sep 6, 2008
On the whole, a low APR is a wonderful thing. Who doesn't want to pay little to no interest for the money they borrow? But some deals are better than others, depending on your needs.

The problem comes quite simply down to balance transfer caps. You're generally paying 3% for your balance transfer, and more and more often that amount is not capped. You may be adding an immediate 3% to your entire balance.

What this means is that if your current interest rate is pretty good, and you're going to be carrying that balance for only a short time, you may lose money. On the other hand, if the 0% APR runs for a year or so, and you're continuing to carry that balance, you'll save money.

Just beware of whatever the promised interest rate is after that time, as well as what you'll be paying on new purchases, assuming you'll be using the card that way. You need low enough rates on these to be worth your while as well.

Obviously, if your credit card has had its APR raised way up for no good reason, it's probably time to switch cards. So long as you have a good credit score you should be able to get a 0% APR card that offers better terms than you're dealing with right now.

You need to read the card terms carefully as you choose one. Is that 0% for 12 months, or 0% for up to 12 months? There's potentially a big difference between those two, depending on your credit score. How badly are you going to be pounded by late fees and higher interest rates if you are late with a payment?

If this is a card you intend to carry a balance on for a long time, compare the cost of the 0% APR card to that of a low interest rate card that you think you qualify for. It is possible that the low rate, if it stays low rate, may be the better long term deal.

No matter the credit card you apply for, read the terms and conditions carefully. If you have a tendency to be late on payments on occasion, this is more important to you than it is to the average user... who still really needs to know this stuff.

When you get down to it, not every credit card deal is right for every person. Watch out for terms that can make a card cost you more than you'd think at first glance, and think about how you're going to use it. You should be your own best protection.
About the Author
Stephanie Foster blogs at http://credit-blog.findcreditonline.com/ about using your credit wisely. Find a selection of 0% APR credit cards to consider at her site.
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