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0% Credit Cards
These days, credit cards in the UK are competing with each
other on two very attractive offers with a headline rate of 0%.
These 0% credit cards will be either balance transfers;
introductory purchases offers or a combination of the two. This
article looks at how to get the best out these types of card and
the things to that the credit card companies want you to do and
therefore the things to avoid. There is a school of thought that
believes that these types of card will soon be a thing of the
past as they cost the credit card companies too much profit, as
consumers get wiser to the pitfalls.
A balance transfer credit card is basically an offer of either
a zero interest rate or very low interest rate for a set period.
The typical period is 6 months although there are variations on
this and there have even been some low rates set for the lifetime
of the balance. However, these are becoming rare. Once, the offer
period expires then the outstanding balance reverts to the
standard rate on purchases. This is very important, as at this
point the credit card company will hope the consumer will not
take any action and so the company can begin to earn money on the
balance.
A 0% purchase offer credit card has many similarities to the
balance transfer offers. The introductory rate and period are
usually 0% and 6 months in the same way as the balance transfer.
Also, once the period expires the outstanding balance is subject
to the standard rate on purchases. It is an important point to
note that the introductory rate does not apply indefinitely on
purchases made in the period, but only applies for the duration
of the introductory period.
It is often the case that credit card companies will offer
both the balance transfer and 0% on purchases on the same card.
When this is not the case it is wise to keep balance transfers
and purchases separate. This is because the balance transfer
portion of an outstanding balance will be paid off quicker than
the standard rate purchases. Therefore an increasing portion of
the balance will be subject to the standard rate and the balance
transfer portion will decrease at a faster rate. There is nothing
to stop a consumer obtaining a credit card with a balance
transfer and a separate low interest credit card for any
purchases to be made. That way the benefits of the offers are
maximised.
In summary the balance transfer and 0% purchase offers can be
of great benefit to the consumer provided that the consumer
understands how to use the offers to their advantage. A degree of
discipline is required in managing repayments. Also, the
cardholder should be aware of any penalties that may cause the
offer to be cancelled. Armed with this knowledge then these cards
can be made to work for the consumer, but remember that when
comparing credit cards to pay close attention to the typical APR,
which is, always stated where UK credit cards are promoted.
Neil Brown has contributed to many financial sites including
Credit
Cards UK.
MORE RESOURCES:
Credit - Google News
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