Zero Percent Credit Card Interest? Beware

Credit card companies want your business and it seems like they’re not very picky about who you are, either. We’ve all heard the tales of dogs or babies being offered credit cards “pre-approved.”

Don’t let it fool you. Credit card companies want your business, yes, and they do send “invitations” to apply to any and everyone. But they’re not going to give a credit card to just anyone. You have to apply, even for those pre-approved offers, and you have to have a certain amount of credit to get the card.

So why do they offer no-interest introductory periods as long as a year? Believe me, they know their business. They couldn’t have gotten to the position they’re in otherwise.

They know your financial profile and they will give the card to those who qualify. Those who qualify?

In the first place, it’s not all that easy to get a no interest credit card, no matter what the teasers (ads) say. You have to have very good credit because they’re not stupid enough to take a chance on someone who may not pay at all. You cannot have skipped from one card to another more than a couple of times because – again – they’re not stupid enough to take a chance on someone who isn’t going to stick with the card when the interest rate does kick in.

They know you so well that they’re willing to bet that you’ll run up a balance on this interest free card with the idea that you’ll pay it off before the interest period starts. They also know you well enough to know the chances of you actually paying it off in time is low enough that they’ll make money on it. Lots of money. Else why would they offer?

Credit card companies are not philanthropists – they’re in it for a profit and the bigger the profit, the better they like it. Forget the friendly ads. Forget the come-ons in the mail. Forget the “great deals,” and the no-interest cards.

One day late with your payment? Suddenly your no interest rate is high – very high. Do it again and see how high it can go. Go over the credit limit? Guess what. Or if they don’t raise your rates, they’ll add a very high penalty to your balance. Again and again.

Then, if you have a problem with this no interest super duper deal, your other credit cards may raise your rates because of it.

That’s not a pretty picture.