With the holidays fast approaching, consumers may be looking to snap up a new credit card with an 0% introductory rate.
That's great if you do your homework, tread cautiously and use deal-specific sites to weed the good offers from the bad.
"Opening a new credit card with an annual percentage rate (APR) that is even just a few percentage points lower than you're currently paying could potentially save you hundreds of dollars," says Chris Mettler, founder and president of CompareCards.com, which tracks 0% credit card offers. "However, you need to be aware that many credit cards will offer a very enticing promotional APR for an introductory period and then raise the interest rate to a higher, ongoing APR."
Credit cards that have a long introductory APR of 0% can be great tools to finance a big purchase or perform a balance transfer to pay off another card balance, Mettler says. "But for consumers that want a good credit card they can utilize as a financing option for years to come, it's more important to have a low, on-going interest rate than utilizing 0% APR for a short, introductory period of time," he adds.
To illustrate some of the better 0% card and low-rate deals out on the market right now, CompareCards.com offers several possibilities, and sent the following along:
- Citi Simplicity Card: This credit card offers 21 months with 0% APR on both new purchases and balance transfers. With almost two years of interest free payments, the Citi Simplicity card can be a great tool if you need to finance a big purchase or want to transfer a balance from a high interest credit card. There is no annual fee with this card, but you'll have to pay a 3% fee or $5, whichever is greater, on balance transfers. After the intro period is up, the on-going interest rate will jump to between 12.99% and 22.99% based on your credit worthiness.
- Chase Slate: This credit card from Chase offers 15 months with 0% APR on purchases and balance transfers. Although there are a few credit cards that also offer 0% interest for a promotional period of 15 months, Chase Slate is the only balance transfer credit card that also comes with no balance transfer fee and no annual fee. As long as you complete the balance transfer within 60 days of account opening, you can enjoy a fee-free balance transfer and take 15 months to pay down your balance totally interest free. The ongoing interest rate on the Chase Slate is 12.99%, 17.99% or 22.99% depending on your credit worthiness.
- BarclayCard Ring MasterCard: This card has a low, ongoing interest rate, CompareCards.com says. With a super low on-going APR of only 8% variable, this card is a great option for someone looking for a consistently favorable ongoing interest rate. If you want a credit card for emergencies or just a reliable source of financing to hold for years to come, then the Barclaycard Ring MasterCard is a great option. The downside is that there is no intro APR, but you'll be hard pressed to find a better on-going interest rate. This card also charges no annual fee, no balance transfer fee and no foreign transaction fees.
If you do go forward with a 0% introductory credit card rate deal, look for tricks and trap doors, says Jared Blank, Chief Marketing Officer with DealNews in New York City. "The biggest trap is that while a credit card may advertise a 0% rate on balances and balance transfers, there is sometimes a fee for making the balance transfer," warns Blank. "So you may think you've got a great rate - which you do - but it cost you 3% of the balance that you transferred because you didn't note the balance transfer fee."
Another potential pitfall comes from how credit card providers "time" the deal.
"Always look at the fine print of 0% credit card introductory rate offers, and do not jump to open up a card every time you get one of these offers," says Leslie Tayne of Tayne Law Group, P.C. and author of the book Life and Debt. "Most likely, once a credit card's 0% grace or promotional period is over, you will get hit with a high interest rate. Some credit cards may even back-date the interest from when you opened the card, which means if you have balance you can be charged interest on that balance from day one."
Many times, credit card companies use this incentive to get you into the door but if you use the card responsibly you are able to repay the balance before the introductory period is over, you can end up saving a lot of money, Tayne adds.
Jennifer Kerry, vice president of credit card services at CO-OP Financial Services in Rancho Cucamonga, Cal., says consumers need to read credit card promotional offers carefully and understand potential charges, specifically for balance transfer fees, penalty fees and rates. "They're actually better off looking for a good, fair low-rate card from a credit union, because credit unions strive to provide their members with reasonable terms that will lead to long-term loyalty and satisfaction," Kerry states.
Still, if you wind up paying too much in rate charges from an 0% introductory credit card deal, you really only have yourself to blame. "Most balance transfer offers are legitimate," says Kevin Haney, a long-time credit industry insider and founder of the blog SavvyOnCredit.com.
"The banks are tightly regulated, and their legal and teams take great strides to ensure compliance," he adds. "The offers are not traps, but many consumers continually trap themselves. The transfers raise initial costs, and may increase open to buy. Some consumers use this to their advantage, but most fail."