0% Introductory APR

It seems counter-intuitive, but you see it all the time: a credit card or other lending agency offering 0% Introductory APR, or annual percentage rate. It doesn’t seem like a good move on the credit card company’s part; after all, they make their money by charging interest. If they lower or eliminate interest, how can they profit from your business?

There are a couple of things going on with these 0% introductory APRs.
  • Competition. There are a lot of credit card companies, and they all want your business. The lower an interest rate they can offer, the more you will consider doing business with their company, over against someone else. Further, if they can persuade you, through these 0% introductory APRs, to move your business from another company to this one, they have not only gained a customer, but they have removed a customer from a competitor.
  • Not a risk. Not just anyone can qualify for a 0% introductory APR. Either you have really good credit, or you are charged a really steep fee for this rate, especially if you want to transfer a balance over to your new lower fee card. Either way, the credit card company isn’t risking that much on you. 
  • It all evens out. Remember, this is a temporary, introductory rate. It will not last forever. If you are considering a new card, or considering transferring your balance from another card to a card with a 0% introductory APR, make sure you know what the interest rate will be after the introductory period is over. Credit card companies can offer a 0%introductory APR because they know that once the introductory period is complete, they will more than recoup any revenue they sacrificed with the lower interest rate. 
  • You’ll stay around. Once people sign up with a credit card, they usually stay there. If you stay, you’ll pay your bills, including whatever interest rates the company charges. Their challenge is getting you in the first place, but once you’re gotten, you’ll usually stay. The 0% introductory APR is simply bait for getting you in.
Keep in mind that credit card companies are in business to make money. They will offer you attractive arrangements so that you’ll choose them, but everything they do is geared toward bringing profit to the company, including the 0% introductory APR. Nevertheless, if you are careful and thorough, you can use these offers to your advantage. An offer with a 0% introductory APR might be just the deal you need to get control of your credit card debt.
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