Syracuse (WSYR-TV) - It disappeared during the recession, but now a popular credit-card incentive is making a comeback.
The incentive is known as a "teaser" rate, in which companies offer a customer a credit card with a zero percent APR.
Three years ago, only 40 percent of lenders advertised the reduced introductory rate, but the number has doubled this year to 80 percent.
The teaser is risky for customers because they’re drawn in by the deal, borrowing money at no cost.
But if they don’t pay close attention to the details of the plan, they can become mired in debt.
“Key is starting early…reading the fine print and then asking for help if you have any questions before it gets into any kind of crisis,” said ClearPoint Certified Credit Counselor Keisha Johnson.
And a crisis is very possible. Financial advisers say missteps with a 0 APR card is a primary driver of bankruptcy. Many times, it's because the borrower doesn't get the money paid off before the 0 percent rate runs out - and a much more expensive rate begins.
“Credit card companies are counting on you not to make your payments fully, to run a balance and to eventually have to pay that 10 to 25 percent interest,” said Financial Analyst Rick Reagan. “So remember, they've run the numbers on this and they've run the numbers that they can make money and that you likely won't pay off before the 0 percent ends.”
Ways to beat the odds:
- Know what the rate will be once the 0 percent expires
- Know how long the 0 percent rate lasts for. Usually, it’s only six to 18 months
- Make sure the purchase can be paid off while the 0 percent rate is intact
Reagan suggests using this rate for a refrigerator rather than a $30,000 car, for example. Buy a big ticket item, but one that can be paid off during that short 0 percent rate period.
That way, you're getting the best borrowing deal out there.
“There's no doubt about it. It means that if you want to get credit out there, and you want to get it at a low rate or 0 percent, now is probably the best time since before the recession started,” Reagan said.
According to research, it’s easier to obtain such deals now than during the Recession, but customers still need a decent credit score.
If they do get into late-payment trouble, advisers say it’s always better to obtain debt-reduction help as early as possible.