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0% APR credit cards back in the market

[Wednesday, November 24th, 2010]

0% APR cards have made a comeback after a while but now the deals offered seem much better. Consumers with good to excellent credit scores (720 or higher) have their mailboxes filled with offers of 0% APR`s on fresh purchases and balance transfers for a period of 21months.

Since the delinquency rates have dropped down to about 26% since the last year card holders have been flooded with offers by issuers. As per the recent data (from the Federal Reserve) delinquency rates are likely to fall further and card companies are scrambling to make the most of the situation by targeting the prime spenders.

There has been a total change in scenario since last year when card holders who actually carried no balances forward and paid their bills on time were actually penalized as the issuers were making lesser profits out of these individuals. Today the same card companies are targeting prime borrowers and are hoping that they spend more and carry their balances forward well beyond the introductory period.

With the change in scenario, promotional offers of 0% balance transfers are being extended to 21 months when compared to about 12 months last year. In fact, balance transfer offers rarely went beyond 15 months earlier on.

The only flipside to this would be the balance transfer fee which would be around 3% to 5% which really cuts down on the potential savings that one could have earned. There is but one card that has put a cap on the balance transfer fee but charges an annual fee of around $495.

One has to bear in mind that the rates after the introductory period would go up to about 15% which is quite high for prime spenders for whom the rates before the credit crunch were bordering around 10%. Hence, it is advisable to pay off the entire amount and not carry any balance forward beyond the promotional offers or one could end up with rates that could be higher than the prevailing rates.

Card companies are free to increase the APR`s after notifying the card holder through mail and though the new rates will be inapplicable on existing balances, it will apply to purchases made as early as 14 days after the notification is made.

But in all with the present offers one can expect a grace period which is longer before losing on the 0% rate. Earlier one missed payment would attract a penalty of 24% or more but now the penalty rates are applicable only after a 60-day period.

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