It is tough to avoid the marketing by credit card companies and banks because wherever you turn, you are greeted by exciting offers. You must have heard a lot of mentions about 0 APR in these offers and wondered what does 0 APR mean. In order to understand about 0 APR, you would need to first understand what APR means.
What is APR?
APR is the acronym for Annual Percentage Rate, and is also frequently known as nominal APR. APR is the rate of interest that will be charged on your outstanding credit. So, if your credit card carries a nominal APR of 10%, it denotes that you will have to pay $10 per year as interest for every $100 credit availed by you. Nominal APR is calculated as simple interest rate for 1 year.
What does 0 APR mean?
Based on what you read and understood in the previous section, you now know what 0 APR means. It means that you will be charged 0% interest on your credit card usage. To put it more simply, it means that you can make use of the credit for free, without any charges whatsoever applied to you.
What does 0 APR on balance transfer mean?
Speaking of 0% interest rates, you might have come across several credit card offers that promise 0% APR on balance transfer. If you were wondering how to deduce any meaning out of that, here is a detailed explanation. Most of the credit card users carry a balance on their credit cards. This balance is the credit that has already been availed of by the credit card user but has not been repaid till date.
Credit card companies offer an option of transferring the unpaid balance on your credit card to any new card that you may decide to sign up for later on. But there is usually a fee/interest rate applied for this balance transfer.
0 APR on balance transfer means that you can repay the outstanding balance on your credit card at 0% interest. What more can you ask for than this? It is as good as using the credit card company’s money for your needs and that too for free.
Are 0 APR offers good for you?
If you are seeking a one word answer to whether APR offers are good or bad for you, I must say that they are good, but under certain conditions. 0 % APR rates are mostly short time offers proposed by credit card companies to entice new customers. Many of these offers usually promise a 0 APR for 12–18 months and then charge very high interest rates after this period is completed. Be wary of such deals and say yes only if the post-offer interest rates are affordable to you.
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