Low & 0% APR Credit Cards - Compare & ApplyBy Joe Taylor Jr.
Low and zero percent credit cards serve two important roles in your personal finance plan. First, they can help you spread out the cost of a major purchase without incurring huge finance charges. Second, they can help you get out of debt by using balance transfer offers to cut most of the interest charges from your monthly budget. Used responsibly, a low or zero interest credit card can protect your cash while offering you purchase protection and other perks.
Ins and outs of low and zero interest balance transfers
Remember that banks aren't offering low and 0 percent balance transfer deals just to be charitable. If you qualify for such an offer, it's because the bank thinks you'll help them make money in one of two ways. Either you'll ride out a large balance beyond the introductory period, triggering hundreds or even thousands of dollars in finance charges. Or, even if you manage to bring your balance to zero at the end of the introductory period, you'll use the account for day-to-day purchases that help generate transaction fees.
If you're planning on carrying a balance beyond the end of your promotional period, seek out the lowest "go-to rate" you can find. No-frills cards tend to offer lower interest rates than rewards credit cards or accounts with lots of perks. You'll get the absolute best deals from banks that face shareholder or government pressure to get excess cash out of their vaults and into the wallets of short-term, low-risk borrowers.
How the Federal Reserve protects your low and zero percent credit card offer
Rules that govern how banks offer low and zero percent credit cards changed radically in 2009 with the passage of the Credit CARD Act. The resulting regulations affect the kinds of offers you'll see:
Account terms can't change without notice. You won't find very many fixed rate credit cards, because financial industry economists know that low rates won't last forever. That's why most promotional offers feature a variable go-to rate, usually tied to the prime lending rate.
You can use a low interest credit card to escape poor service from a competing bank. Before the Credit CARD Act, some banks used a "universal default" policy to cancel promotional terms if a cardholder's credit report turned up a late payment or any collections activity on other accounts.
The best low and zero percent credit cards offer introductory periods that last anywhere from 12 to 18 months. The higher your credit score, the longer an introductory period you're likely to receive.
Potential pitfalls of low and zero percent credit cards
Because low and zero percent credit cards have become more common (and more competitive) in recent months, you'll want to review offers carefully for fees and penalties that can eliminate your savings:
Verify how a bank intends to bill your balance transfer fee. Most balance transfer offers require a flat fee of up to 5 percent of any balance you transfer from another lender. Some banks may charge you interest on this fee, even during your introductory period.
Complete all balance transfers within the allotted time. Balance transfer promotions typically give you 30-60 days from account opening to make transactions that are eligible for the promotional interest rate.
Pay your monthly minimum balance on time. Missing a payment by just one day could trigger the expiration of your promotional period. Some banks may even charge you interest for your entire balance from day one.
Understand your introductory offer's deadlines and go-to rates. Many retail credit cards will charge interest on any portion of your original purchase if you fail to zero out your balance by the end of your promotional period. A handful of low and zero percent balance transfer offers have started using similar terms.
The best credit cards use clear language that makes it easy to understand what you'll pay for the privilege of a low or zero percent - interest card. If you can't wait any longer to make a major purchase, or if you've got a big balance you want to knock down over the next year, compare the low and zero percent credit card offers on our site to learn which accounts may work best with the way you manage your money.