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0% APR cards are back

[Saturday, November 6th, 2010]

The 0 APR cards which ones used to flood the mailboxes of the customers are now back once again, but this time with a better offer. Those credit card customers who have credit scores in excess of 720 are given these card applications and preapprovals. The 0 APR is applicable on both new purchases and balance transfers, sometimes extending up to 21 months. As delinquency rates which have dropped drastically by 26%, continue to go down, analysts expect more customers to receive these offers, as credit card issuers will try to enhance their profits.

A whopping 71% of the mails from credit card companies are about introductory APRs on purchases, which is up from 53% a year ago. The balance transfer offers are also increasing constantly and comprise of 65% of the credit card offers, which has increased from 54% in the previous year. This turnaround is quite dramatic from last year, at a time when borrowers maintaining low or zero balances were abandoned by card companies because they translated to fewer profits for the lenders. The credit limits were also cut down followed by an increase in the interest rates to as high as 30%.

There are promotional periods for 0% APR offers attracting balance transfers, with an introductory period up to 21 months which is much higher than the 12 month average promotional time period last year. 3 years back it was rare to see any promotional period last beyond 15 months. Someone who pays 300 dollars every month for an outstanding balance of 5000 dollars and an interest rate of 18% would be paying 797.17 dollars of interest in 20 months. All this extra interest could be saved through a balance transfer. In fact those credit card customers who have a credit score greater than 720 can choose from as many as 12 options for balance transfer with promotional period of at least 12 months. The longest period of all cards is offered by the Citi Diamond Preferred and the Citi Platinum Select cards.

There is a downside to this balance transfer offer, which is a 3-5% balance transfer fee that you will have to pay. This will eliminated a major part of the saving. There are 18 cards which offer a 0% balance transfer to customers with high credit scores but only one has a fees in that range. A lot of credit card issuers have also gotten rid of caps for balance transfer fees.

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