Understand 0 APR on Low Interest Credit Card Offers
0% APR Cards offer advantages but only if you understand the basics
Credit card companies make money on charging you interest on your outstanding balances. This is a reality that will likely never change.
However, these same credit card companies provide incentives such as 0% APR to entice you into their programs.
Before you leap for joy at this low interest rate offer, you should understand a couple of basics.
What is APR?
This is simply an abbreviation for the term "Annual Percentage Rate". In the credit card industry this the period interest rate multiplied by the number of periods in a year. So for example if the posted period interest rate is 2% per month then the APR is calculated at 2% times 12 months : the APR is 24%.
This is the first little nugget that is important. In our example above 2% sounds very appealing on the marketing speak for a new credit card. The reality is though that you are paying 24% annually on your outstanding credit. That is APR my friend.
Introductory APR
Many credit card companies will offer low interest rates for a limited period to new applicants. Some will even offer 0% APR to you if you sign up. Be aware, that these low interest offers are usually for a short period of time and will expire.
Before you accept these offers, make sure you understand the APR that will be applied once this introductory APR expires. If it is higher than your existing card you may wish to reconsider.