SmartMoney is reporting that we should expect to see more 0% APR credit card offers available for those who have credit scores of 720 and above. Balance transfer offers are also on the rise.
It wasn’t long ago that credit card companies cut out 0% APR offers and balance transfers since those with better credit tended to also be less profitable as they usually paid off their balances. According to the SmartMoney article, credit card issuers are hoping that the more credit-worthy will spend with their new cards and keep a balance beyond their introductory offers.
Here is what we can expect from these new credit card offers (from SmartMoney);
- Longer balance transfer promotional periods. You can now find balance transfer deals for up to 21 24 months. A year ago the promotional average was 12 months (note that’s the average, not the highest offer). For someone looking to pay off a significant balance, 21 24 months gives a nice cushion against interest accruing on the card balance. The cards mentioned in the article that offer some of the longest balance transfer terms were: Citi Diamond Preferred, Citi Platinum Select (the Citi Diamond card offers 18 months of promotional APR on balance transfers while the Citi Platinum Select is 21 months*), and the Discover More card (18 months promotional APR on balance transfers*).
- Higher balance transfer fees. Though balance transfer promotions are getting longer, credit cards companies are also upping the fees, from 3-5% of the balance transfer amount. Also, many cards no longer have the transfer fees capped. For some, this could eat up much of the advantage of transferring a balance. Still, there could be a significant enough savings to take advantage of the deals.
- Higher interest rates after the promotional period. Once your promotion ends, you could see rates, on average, of 15% compared to 10% before the recent economic credit crunch. If you are transferring a balance, make sure you pay it off before the promotion ends to avoid paying interest on the balance.
- More late payment forgiveness. Prior to the CARD Act of 2009, if you made one late payment your credit card company could bump you up to the penalty APR rate. Now, you will only incur the penalty rate once you are more than 60 days late with a payment. Now this is a nice bit of cushion but you should always make it a priority to get your bills paid on time. You can’t let the 60 days make you lazy!
Personally, it’s good to see 0% APR offers out there again, both for new charges and for balance transfers. When I was first getting serious about paying of my credit card debt, I used 0% balance transfer cards to help me pay more principal towards my debt and it allowed me to pay off my credit card debt faster.
When my wife and I were getting married, we signed up for an American Express Blue card, which, at the time had a 0% introductory rate on new charges for a year. We used the card on everything we could to rack up points (we always paid it in full). We were able to accumulate enough rewards points to get gift certificates to save on new bedroom furniture.
What do you think about the return of 0% APR credit cards?
*Be advised that promotional offers change and while we try to keep up with card changes, new promotional terms may not be reflected in this article.