Once the stuff of legends – and still a popular bedtime story for bankers to tell their children – 0% APR credit cards are being reintroduced to the market right at the time when many Americans need them the most.
While these no interest cards used to be an easy way for banks to make money after their promotional interest period ended, they disappeared after the major crunch a few years ago.
Now that they’re back, though, they appear to be a decent deal.
Here are a few reasons you might want to check out one of these nifty pieces of plastic:
Longer Balance Transfer Promotions
Although we’ve already blogged about why transferring your balance might not be such a great idea, now that the no-interest period for transfers is up to 21 months from 12, obtaining a 0% APR credit card can be a good move for people with manageable debt – or for anyone who has good credit and is just looking for a deal.
Extended Grace Periods
It used to be that missing a payment on a no-interest credit card would automatically end the promotional APR, but now consumers have a 60-day grace period to pay their bills before creditors cut the promotional rate.
While this won’t solve any problems for serious debtors, if you have a history of being absent-minded with your credit card payments the extended grace period should be enough to make you take another look at 0% APR cards.
More Consumer Protection
Because of the Credit Accountability, Responsibility and Disclosure act, which passed just two years ago, these new 0% APR credit cards are forced to honour the same array of consumer rights that their higher-interest brethren do. This means honouring refunds for fraudulent services, not jacking up your interest without warning and no more hair-trigger penalty fees.
Structured for Prime Borrowers
Unlike the last generation of 0% APR cards – which made money for creditors by preying on debt-ridden consumers looking for a haven from their mounting interest – these new credit cards are structured primarily for borrowers who already have good credit.
Although the interest ceiling is higher once the card’s promotional period ends, borrowers with good credit can still secure a 15% APR on their accounts, and the new protection laws won’t saddle responsible consumers with excessive penalties and fees.
It makes sense when you think about it from a bank’s perspective. When the economy was thriving, banks shunned prime borrowers in favour of collecting fees from less responsible consumers, but now that the economy in the tank, the only way banks can make money is by luring back the people who still have savings accounts.
These 0% APR credit cards will always come with a slight catch – their annual fees are still relatively high, and there are still riders hidden in the fine print. But for people who are responsible enough to pay their bills on time, these cards can offer a welcome reprieve from rising interest rates. Well, they can for two years, at least.