0% Credit-Card Offers Are Back

Back in the bad old days of the credit crunch, credit-card issuers cut way back on low-ball interest rate offers and the days of 0% APR on new purchases and balance transfers seemed to be over. Now, however, as the default rate on card debt has dropped, card issuers are loosening up and offering sweet interest-rate deals to those with good credit. If your credit score is 720 or above, you’ve probably already seen these offers filling up your mailbox.

There’s good news and bad news (as usual). The obvious advantage is the low interest rate. If you’re paying a typical rate 15% or more on your credit card balance, a 0% interest rate could save you serious cash. Another plus is that the window for balance transfers is getting wider on several of these 0% offers. Some card issuers will give you 0% interest on balance transfers for as long as 21 months, compared to the average of 12 months.

On the downside: Most of these card issuers charge a transfer fee of 3% to 5% on balances. The bigger your balance, the higher the fee, and that will affect how much you’ll save. Another drawback is that the interest rate will jump after the promotional period to a rate that may be higher than the rate you have on your current card, unless you pay off the balance in full before the promotional period ends.

One of the ironies of this new-business push is that it’s aimed at card holders that card companies were looking to get rid of just a year or so ago. Consumers who paid on time and carried small balances, or none at all, weren’t generating enough profit to make them an attractive market segment. The revised view is that the 0% offer on new purchases and balance transfers will spur these credit-worthy consumers to spend more -- and hopefully carry a balance after the introductory period runs out.