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What does 0 Intro APR Mean
For those trying to decide on the perfect credit card, a common question is what does 0 intro APR mean? This is an important question because it means different things to different credit card issuers, so figuring this out is very important when choosing a credit card. To fully understand 0 intro APR, understanding how credit cards work and how they figure fees and interest is important.Get a great credit card with 0% interest at DontSpendMore.com
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Annual Percentage Rate
It’s important to understand that a credit card is basically a loan from a financial institution, most often a bank. The banks don’t loan people money for free and the way they make money is by charging interest and fees as well as penalties when something goes wrong. The annual percentage rate (APR) is one way the bank makes money on the loan. It is the percent of total charges that the bank charges people who use credit cards for the right to borrow money.
0 Intro APR
So, 0 intro APR means the bank is willing to give up charging a customer interest for a certain amount of time, typically around 1 year, but some banks offer much longer and much shorter 0 interest time periods. During the time when the banks is offering 0 interest, there’s a good chance that card holders can purchase many items without accruing any interest charges, so it’s like a loan without having to pay for having a loan. Many times banks also allow card holders to transfer their balances from other cards to also have 0 interest on those balances as well.
So, what does 0 intro APR mean over the course of a year on a credit card?
- If a person has a balance of $1000 on a card at an interest rate of 10%, the APR would be $100.
- However, if a person has the same balance of $1000 on a 0 intro APR card for 6 months (10% thereafter), the interest would only be $50 ($0 for the first six months, and $50 for the second six months of the year which is half of the yearly amount). This would save the card holder $50.
Imagine how much savings that would be over 12 or even 18 months with a card with 0 intro APR for that length of time.
What to watch out for
However, card holders should be very careful when using a card that offers 0 intro APR because there are things that can cause the 0 APR to end. Typically this includes things like making a late payment and going over the available balance are two very common triggers for stopping 0 APR and moving to a regular APR.
However, customers should look very carefully at the card before taking one with zero interest for a certain amount of time because banks don’t loan out money for free, so there has to be somewhere else where the bank is going to make money. This typically comes with variable interest on the card after the intro period, so checking out the APR which will go into effect after the intro period is extremely important when comparing cards and deciding what does 0 intro APR mean.
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