Are 0 Percent APR Credit Cards a Thing of the Past?

Remember all those 0 percent APR credit card offers that practically bombarded you on a weekly basis? As the economy continues to nosedive, along with plummeting bank earnings, you might be wondering what happened to all those great deals.

Financial Institutions Cut Costs

Not long ago, droves of 0 percent APR credit cards flooded mailboxes across the nation. They provided consumers a simple, no-fee option of transferring existing high interest credit card balances onto a new card at 0 percent interest for up to 18 months. The 0 percent balance transfer feature has been very effective at attracting new applicants, but has unquestionably been a “loss leader” for banks and card issuers. The past year has brought about unforeseen changes in the financial industry though, resulting in a drastic reduction in the number of cards being marketed to consumers overall. Banks and other financial institutions simply aren’t making anywhere close to the profits they used to. Foreclosures, bankruptcies and mounting collection costs in our struggling economy have dramatically affected earnings and the stability of the financial industry. Card issuers have very few choices in this crippling recession: they can either increase fees or eliminate products that are diminishing their profits. Given the nature of these “loss leader” 0 percent promotions and the financial pressure that banking and lending institutions are under right now, it’s easy to see why credit card offers like these are fading from view.

0 APR Transfer Fees Are Costly

This type of credit card is still around, but there’s been a huge drop in the number of offers extended ? especially for fee-free balance transfers. Today, if you come across an offer, it’s more likely to include a higher balance transfer fee. Today’s offers have consumers paying around a three percent transfer fee with a minimum fee of five dollars to 10 dollars, and an unlimited maximum fee. Translated, this means that the cost of transferring an $8,000 card balance to one with an introductory offer for a three to six month period comes with a hefty $240 dollar fee.

There is talk among financial experts that these cards could become a thing of the past; mostly because the providers are becoming more anxious over the state of credit card billing in this economy. But for now, cards offering zero percent still exist; just in very short supply, and usually minus the fee-free transfers.

Understanding the Terms and Conditions

If you receive an offer, making sure you understand the terms of a card before choosing one is critical. Very few fee-free credit cards still exist, but if you happen to find one, you should understand that they come with very strict stipulations. For example, a common stipulation is that the balance transfer is only free if the transfer occurs within the first couple of months of opening the account.

Do not skip reading the fine print and legalese if you are considering any credit card offers. Terms and conditions of credit cards can vary greatly from one card to the next. It’s also important to understand that most of these card offers now require excellent credit. Receiving a “prequalified” offer by mail is no guarantee that you will even get approved nor qualifies you for the most beneficial terms being offered either.

Being approved for these card offers means that you are required to follow the terms and conditions explicitly ? no exceptions ? or you will immediately lose all of those attractive introductory rates and any perks that were part of the deal. Being just one day late or going over your credit limit by even a single penny can quickly send your account into a much less favored status, including much more expensive financing charges and accompanying fees.

These types of heavily incentivized offers are very costly for banks and card issuers and because of the dwindling state of the economy will only continue to slowly, but steadily, drop off the radar screen. They may not completely disappear but they will certainly not be as heavily promoted as they have been in the past few years. As banks and credit card issuers continue to tighten their belts to reduce operating costs and other expenses just to stay afloat, reducing the number of heavily incentivized offers being solicited to consumers is simply a matter of survival for many.

2 Comments

  1. The 0% card is definitely on the way out. Lenders are struggling at the moment, and the easiest way out is to raise interest rates on customers, new and old. However, when we are back in a boom time (many years down the line), I expect they will be rushing to offer 0% cards again as a way of tempting people to get back into debt.

  2. I have around $2,750 in credit card debt — around 4 credit cards with low limits, but all around 90% with their balances. I’ve never missed a payment, so that’s really the only good thing about them. The card with the highest credit line is 1,000, and the others range from 300 to 600 dollars.

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