2

(Read the normal print for an amusing story, skip to the bolded text for more important info)

To begin, I'm a scallywag.

I saw that card offer in the mail and did some digging because I'm not used to credit cards. 0 percent APR for 12 months and APR is the interest that builds up if you don't pay on time. I pay on time. I wait until the last second but always on time so I'm decent with that. But how awesome would it be to have a card that I don't have to pay off for 12 months? I'm not even a spendthrift, ask my mom, I'm frugal as hell. Still, 12 months of not having to think about paying the bill. Nice.

So I get the Bank of America card, I'm approved, it shows up two days ago. And I'm reading through the pack of stuff because I'm plain like that. And I look at the interest and fees section - because I really don't know what I'm doing and if this 0 APR thing is legit.

It doesn't seem like it is. Or at least the way this is worded is a bit confusing to me.

The APR is 0.00% through to my statement Closing Date in February 2018, so almost 12 months. I have an Introductory Offer ID that I don't know what to do with, after which the APR will be 20 something percent. Same with Balance Transfers.

So then I go to the fees section. Promotion Offers are temporary offers, yada yada yada, but then at the bottom, not even bolded, it says:

"If you revolve your balance to take advantage of a Promotional Offer, all transactions and balances, including purchases, will be charged interest."

Huh?

So I look up "what is revolving a balance?" It's basically not paying on time, revolving the balance by waiting another month or so, at least I think that's what it means.

But isn't that the entire point of having 12 months with 0 percent APR? That can't possibly be right or else why would anyone get excited - knowing that they have to pay their bill by the end of the following month anyway or else they'll be charged interest? I googled more about "what 0 APR means/revolving balances/dangers" but nothing useful came up.

Then I thought, "maybe only certain cards allow you a 23-25 day grace period, and this one doesn't, so they offer you 12 months of paying your bills "on time" and ignoring any daily interest. But, that's not true, becaus e my due date is at least 25 days after the billing cycle.

Basically I don't understand how having 0 Percent APR helps anyone if you basically have to pay the bill on time anyway to reap the benefit.

Thank you for any answers and for

  • 1
    I think you're reading way to far in to this. – quid Nov 8 '16 at 2:35
  • Read this answer or this one to understand how some of the 0% offers actually work. – Dilip Sarwate Nov 8 '16 at 3:57
  • I can't tell if you know this or not, but even at 0% you always have to make the minimum monthly payment, which is usually around 1-2% of the entire balance. – TTT Nov 8 '16 at 7:08
  • 1
    "Revolving balance" usually means that you move the balance from one promotional offer to another to avoid paying interest. It can be a useful technique to dig yourself out of a hole (if you pay down the debt) or a technique to dig a much bigger hole (if you keep spending) I'm not sure how they qualify that here. You would need to find their definition. You claim to be parsimonious so it's no clear why you would need 0% interest. Do you have a large purchase in mind that you could pay off in 12 months? – JimmyJames Nov 21 '16 at 15:06
  • @JimmyJames: If you're me, you put the amount you would have paid on the credit card in your mutual fund accounts instead. So you have free money to invest for a year or two. – jamesqf Nov 22 '16 at 4:43
2

And I'm reading through the pack of stuff

There should be a soft copy of Terms and Conditions. If so, please put up a link. Generally 0% APR comes with some strings attached. The literature on the Bank of America site shows 0% APR only for Balance Transfers done with 60 days.

On one of the comparison sites; the Bank of America card shows 0% only for balance transfers and purchases done in first 60 days.

0% Introductory APR for 12 billing cycles for purchases AND for any balance transfers made in the first 60 days, then, 13.24% - 23.24% Variable APR. 3% fee (min $10) applies to balance transfers.

Which means that if you spend say $200 in first 2 months, you can repay this $200 in next 12 months at 0% APR. However if you spend another $100 in 3 month, this should be paid in full along with a portion of $200; else interest would start for all of $300.

Generally 0% APR don't make sense as there are lots of hidden terms and conditions and the real benefit may not be that great.

Edits:
The Literature looks quite confusing. On the Main Page it says;

Introductory APR 0% for 12 billing cycles
Applies to purchases and to any balance transfers made within 60 days of opening your account

This would mean say you do a Balance transfer within 60 days, of 120 and say you make purchases with 60 days of 120. Total liability is 240.

Scenario 1: Assume you do not use this card. Then you can safely keep making payments of 20 per month for next one year.

Scenario 2: In 3rd month, you swipe for 100 more. Now the Total Due will be 100+20. If you make the payment of 120, then fine. If you make a payment of only say 50; Then the interest will be calculated for [240-40, payments for 2 months+50 of current month]; i.e. on 250.

However the detailed "Terms of Conditions" seem to limit this only to Balance Transfer of 120 in first 60 days and not to any purchases in first 60 days.

With Terms so vague, my suggestion, don't get this card for these benefits. Get this if you need a regular card.

  • Unless I'm reading this wrong, It says the same thing here. So I misunderstood what Introductory APR means then. It says 0% APR for both purchases and balance transfers. And the definition you provided is what I'd assumed. Mine is a BankAmericard Cash Rewards card - the disclosure summary states 15 statement closing dates rather than 12 billing cycles. – Soble Nov 21 '16 at 4:23
  • However, that conflicts with the information I have now, looking at the Interests and Fees section of the Credit Card Agreement. It states that any revolving balance (which I presume to refer to waiting to pay the "$200" for 12 months) will be charged interest. Specifically it states: "If you revolve your balance to take advantage of a Promotional or Introductory Offer, all transactions and balances, including purchases, will be charged interest." Again, wha? – Soble Nov 21 '16 at 4:25
  • @Soble See edits. This is quite confusing. The text on main page do not follow through in the secondary page. – Dheer Nov 21 '16 at 6:27
0

Whether or not the specific card in question is truly 0% interest rate for the first 12 months, such cards do exist. However, the bank does make money out of it on the average:

Still, 12 months of not having to think about paying the bill. Nice.

This is exactly what they want you to do. Then in 12 months, when you start thinking about it, you may find out that you don't have the cash immediately available and end up paying the (usually very large) interest.

It is possible to game this system to keep the "free" money in investments for the 12 months, as long as you are very careful to always follow the terms and dates. Because even one mishap can take away the small profits you could get for a 12 month investment of a few thousand dollars, it is rarely worth the effort.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.