Credit cards with no interest? Really?

Many people use credit cards like crazy, lured in by "limits" that are astronomical. It is not unusual for someone to have a credit limit that is as much as their annual salary. Bank cards are useful, but they are often expensive, with rates of interest that can run as high as thirty percent a year for people who fail to pay their monthly debts in a timely manner. The typical U.S. home has nineteen credit and debit cards, and an outstanding debt of nearly five figures from their use.

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Until the major bank card issuers increased their required payments in 2005, a lot of Americans who paid only the required payment every month actually saw their balances rise after sending in payment. For those who have problems with charge card debt, it might be quite difficult to repay when the interest rates are so steep.

Some people with these types of problems may find an advertisement in the mailbox one day from a company offering another credit card with a special promotional offer. The promotional offers from credit card lenders vary, but they generally promise a low introductory rate for the initial six or twelve months if you transfer a balance from a current account. Zero percent interest sounds great to most borrowers and they frequently move quickly to transfer their ten thousand dollar balances to the new card so they can pay 0% interest for a while. Sometimes, credit card companies offer promotional rates that can run as low as zero percent.
 

So, what's the gimmick? Are these offers genuine?

The details of zero interest offers are often on the back of the document, and written in what seems like micro-print. Yes, zero interest charge card advertisements are legitimate, to a degree. People thinking about a 0% interest credit card should investigate the fine print on the documentation for the credit card account.

Here are the things may find in such an offer:

• They may increase your rate of interest for any reason at all at any time.
• You may lose the short-term rate if you make a late payment on any other account you have!
• New expenses will accrue interest at a significantly higher rate, often as much as 20%. The rate of interest applies only to the moved balance, and not to completely new purchases.
• Monthly payments will be credited to the charges compiling the smallest interest rate first, so any new purchases not fully repaid will accrue interest at the high rate.
• You may lose the promotional rate if you make a payment late on the account. The promotional interest rate will apply only for a specifically expressed period of time.
• Companies may increase your interest rate for making a late payment to anyone else, using what is known as the "universal default clause." Yes, they will evaluate your credit record occasionally to see if you are paying your phone bill in full and on time.

If you are extraordinarily disciplined, you may be able to employ a temporary, low interest balance transfer. If you are not disciplined enough to use a balance transfer, be careful, as it might be an expensive thing to do. By all means, if you can transfer an outstanding balance, pay it off in time, and avoid using the account for anything else, it may be worth your while. For a number of people, zero interest charge card loans simply represent an opportunity to create yet another high interest debt. If you have a problem already owing too much money, opening another account will not help you.