You might be already aware that 0 introductory APR credit card denotes a credit card that charges 0 % interest rates/APR. It is hard for credit card consumers to not know about these cards because there is so much of effort initiated to market, promote, and sell these cards by banks and credit card companies.
At the outset, 0 % interest does seem to be a very exciting offer, but if not carefully handled, the 0 introductory APR credit card may turn out to be much costlier than you bargained for.
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How do banks make money with 0 introductory APR credit card?
How can banks make any profit from selling a 0 introductory APR credit card, and if they are not making any profit out of the sales, why are they so enthusiastic about promoting these cards to every customer with a good credit score? Though it seems at the outset that there is no profit to be made on a 0 % APR, the actual fact is different.
Banks make a lot of profit on these 0 % APR cards and there are various ways in which they make their margin.
Profit from new purchases
Though the marketing and promotional activities make it look like the 0 introductory APR credit card charges 0% interest on all kinds of transactions on the credit card, the real truth is usually hidden behind a tiny asterisk.
When you check the footnote that explains more about the asterisk, you will know that the 0% interest applies ONLY to certain transactions. In all probability, the 0 % interest rate is applicable only for balance transfers and this offer, too, is restricted to new customers only.
If you overlook the asterisk and terms and conditions by mistake and then go ahead and use the card for new purchases, the bank immediately makes a profit by charging higher APR on this transaction. It may be only after you check the bill next month that you bother to get more info about the terms and conditions and by that time you have already made 1 or more purchases.
Profit from delayed payments
Another important condition that applies to the 0 % interest rates on a 0 introductory APR credit card is the duration or validity of the offer. Usually the 0 % APR interest rates offers are commonly valid only for 12- 18 months. If you forget about the expiry date of the offer and carry the balance beyond this date, all of the remaining balance will be charged higher rates of interest. This is another way for banks to make a profit on the 0 introductory APR credit card.
A 0 introductory APR credit card is the best kind of offer that any credit card user can ever get. What more could you ask for than enjoying credit for free? But it is your responsibility to make sure that you are totally informed about the terms and conditions and fine print before you sign up.
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