Credit cards and paying zero interest. What you need to know.

Charge cards are convenient, but they are also expensive, with interest rates that can average as high as 30% per year for those who do not pay their monthly debts when they are due. The average American family has nineteen credit and debit cards, and an existing debt of almost five figures from their use. Americans use bank cards like crazy, encouraged by "limits" that are astronomical. It is not uncommon for someone to have a credit card limit that is as much as their annual income.

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For individuals who have problems with charge card debt, it can be quite difficult to pay money back when the interest rates are so steep. Until the credit card companies increased their minimum payments recently, a lot of debtors who paid only the minimum payment every month actually saw their balances rise after sending in payment.

Some consumers with such problems may find an advertisement in the mailbox one day from a bank or financial company marketing another credit card with a limited "low" offer. The temporary offers from credit card companies differ, but they generally promise a cheap introductory rate for the initial six or twelve months if you transfer a balance from an existing account. Zero percent interest sounds great to most borrowers and they often move swiftly to transfer their five thousand dollar balances to the new credit card so they can pay 0% interest for a while. Sometimes, credit card companies offer temporary rates that can run as low as zero percent.
 

So, what is the catch? Are these offers legitimate?

Debtors considering a zero interest bank card should investigate the fine print on the documentation for the credit card. Yes, 0% interest credit card offers are legitmate, to a point. The fine print of zero interest offers are ordinarily on the back of the document, and written in what seems like something that requires a microscope to read.

Here are the things may see in such an agreement:

• The promotional interest rate will apply only for a specifically expressed period of time.
• You might lose the "low" rate if you make a payment late on the account.
• You may forfeit the short-term rate if you make a late payment on any other credit card account you have!
• New purchases will accrue interest at a significantly higher rate, many times as much as twenty percent. The promotional rate applies only to the moved balance, and not to recent purchases.
• Companies may raise your interest rate for making a late payment to anyone else, using what is known as the "universal default clause." Yes, they will evaluate your credit record from time to time to see if you are paying your cable TV bill in full and on time.
• They may raise your interest rate at any time, for any reason.
• Monthly payments will be credited to the charges accruing the lowest interest rate first, so any new purchases not paid in full will accumulate interest at the higher rate.

If you are not responsible enough to use a balance transfer, be careful, as it could be an expensive thing to do. If you are extraordinarily disciplined, you might be able to employ a temporary, low interest loan. By all means, if you can transfer a balance, pay it off in time, and avoid using the account for anything else, it may be worth your while. For a number of consumers, zero interest loans only represent an opportunity to create one more high interest debt. You don’t need that.