Around this time last year, credit card companies began tinkering with 0% interest rates. First, they stopped offering fixed APR credit cards with low interest rates. Then, slowly at first, they began reducing 0% interest offers from as much as 15 months to around 6 months. Today, 0% interest credit cards have managed to hang in there, though many deals are not what they once were. Here’s a round-up of what you can expect to find in the credit card market today.
1.) 0% Interest on Purchases: Credit card companies use 0% interest rates on purchases to lure in new customers who will use their cards, spend (and earn then fees every time you use the card) and then carry a balance once the 0% interest period expires. This allows them to earn money when you spend and, eventually, what you do not repay during the 0% period. For a while, the length of 0% introductory periods ballooned to as much as 15 months. However, during most of the past five years, the average 0% rate lasted about 12 months. Today, more and more credit card companies are reducing the length of these rates to the legally mandated minimum of 6 months. Some companies still do offer 0% interest rates on purchases for up to 1 year, but these offers are the exception, not the rule. (You can view current 0% credit card offers here and apply online.)
2.) 0% Interest on Balance Transfers: Getting a 0% interest rate for 12 months on balance transfers has literally helped over 20,000 visitors of Smart Balance Transfers save money on interest during the past two years. Getting a 0% interest rate for a full year can save a person with an average interest rate of 15% save a little over $100 for every $1000 in transfers over the course of a year. A person with a $5,000 credit card balance who does a balance transfer can save around $500 with a 0% interest rate for a year.
Unfortunately, many companies are reducing the length of 0% balance transfer offers to 6 months, which sharply reduces the money that can be saved, especially once balance transfer fees are taken into consideration. Fortunately, a few 0% for 1 year balance transfer offers still exist. Hopefully, these offers will not disappear in February when the new credit card laws are fully enacted. However, anyone who could benefit from a year without interest should seriously consider applying for a balance transfer credit card and doing a balance transfer before February just in case the banks choose to get stingier. (For more information on current 0% interest balance transfers for 12 months, please see the appropriate section of this website so you can compare offers and apply online.)
Final Thoughts: If you’ve followed the balance transfers blog during the credit crunch, you’re already aware of my concerns about the future of 0% interest rates. During the easy money decade we are about to exit, 0% interest rate offers were everywhere from our mailboxes to the television. However, when was the last time you got a 0% credit card offer in the mail? And, if you did get one, where are the other five that usually showed up in the mailbox alongside it.
Banks are likely to continue to be tight with credit card lending and this may mean less 0% interest options in 2010 and beyond. All the more reason to lock in a 0% interest rate for 12 months today while such offers still exist.
Here are a few leading offers you can compare:
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