Sunday, June 17, 2007

0% APR?

One tidbit of information that you should know, is the the reality of a "0% APR". What does it mean? You probably have seen 0% APR displayed on solicitations in your regular mail as well as in your email inbox. Your APR is simply the interest you pay on a loan or credit card. You have to pay attention to credit cards because of the way your interest payments are calculated. The 0% APR is the promotional rate. Your new APR will become active as soon as the promotional period has ended. The 0% APR is not necessarily a bad thing and you can make it work for you if you don't let your spending get out of hand and if you make your payments on time. Unlike traditional loans, instead of interest being compounded monthly and having those payments eventually go to the principal amount, credit card payments are computed on an average daily balance and compounded daily. An explanation of how your payment is calculated is outlined in a disclosure given to you by the credit card company. Each credit card issuer's terms are different. "0% APR" could mean you pay no interest for 6 or 12 months, however you are still paying minimum payments per month. If you fail to make these payments on time then the contract rate will be applied and can be as high as 29.99%.

Also, 0% APR promotionals generally apply to purchases you make or balance transfers from another credit card or loan balance. Be sure to understand which one it applies to.

Also check out the Federal Reserve website as well. It has published some really good information on "Choosing a credit card".

Sign Up For Your Chase Student Flexible Rewards Card!

1 comment:

Varicose Vein Info Guide said...

Wonderful information on credit card and how 0% APR works.

Varicose Vein Information