Since the 1980’s, credit card
companies have been on a mass mailing campaign to
get your business, and one of their most ingenious
ways of going about it was with 0% APR credit
cards. The idea was a hit, and has become
a part of the industry that isn’t likely to
go away. (It’s interesting to note that originally,
it was only intended as a campaign to attract more
clients—it was never intended to become a long-stay
in the industry.)
Nowadays, many people won’t even look at a
credit card unless it offers a 6-12 month
interest free period. But what may be an
ideal solution for one person trying to get out of
debt, may be the downfall for another. Let’s
take a look at how these credit card offers can affect
different people.
Scenario # 1
Joe was up to his ears in high-interest debt (19%),
and because of the recent mandate by the Federal Government,
his monthly payments were scheduled to double next
month. He knew that he couldn’t make the payments,
and his near-perfect credit score would suffer greatly.
He called his credit card issuers, but they refused
to lower his interest rates or reduce his monthly
payments. Because Joe wanted to purchase a new home
in the next few years, it was critical that figured
out a way to save his credit rating.
Then he received an offer in the mail for a 0% APR
credit card. Joe quickly transferred his $20,000 balance
to the new card, and by doing so, saved a whopping
$3,800 in interest charges. He used the introductory
time to pay down the balance on his credit card, and
within a few years was financially stable enough to
purchase his dream home.
Scenario # 2
Barbara was also in debt, had the same desire to
purchase a new home within the next few years. She
also received a 0% APR credit card offer in the mail,
and quickly applied, knowing that it was the answer
to her problems. She did the math, and figured that
she could save thousands by transferring her current
high-interest payments.
But when she realized how much extra she was saving
each month, instead of paying the money toward her
credit card balance, she looked at it as “extra”
income. In fact, it wasn’t long before Barbara
had charged up her new credit, and her payment was
now the same as it had been before. By the time the
introductory period was over, and the interest rate
jumped to 19%, Barbara was once again in over her
head—only this time with a much higher balance.
As you can see, 0% APR credit cards are
a wonderful tool for the consumer—if used correctly.
If you plan to apply for one, be sure that you use
it to your advantage, and that you don’t fall
into the same trap as Barbara.
If you want to know more about these types of credit
card offers, check out these sites:
http://creditcardsatchase.com
(Chase Platinum Credit Card)
http://www66.americanexpress.com/
(American Express Blue Credit Card)
http://www.discovercard.com/
(Discover Platinum Card)
7/13/05
