With all of the recent credit card reform and the financial market of the world in such frenzies, it might surprise you that the popularity of no-interest credit cards is on the rise.
Over the past several decades the average American consumer has been getting more and more accustomed to alternative payment methods like checks and credit cards. Debit cards have become the method of payment for many young people across the country and digital development continues innovating within the industry with mobile payment technology and other alternatives.
Over the past year or two, though, reform within the credit card industry has led to several changes among credit card products. Part of these changes represents credit card issuing banks and other institutions trying to recoup losses they will feel from the restriction of fees. Part of these changes represents awareness of such alternative methods in order to adapt to the changing community. Perhaps this is the reason why credit card companies are currently developing and actively releasing no-interest credit cards: as an attempt to retain existing customers and entice new ones.
Taking a closer look at this, MarketWatch columnist Jennifer Waters reported recently that almost 50 percent of all major credit card issuers across the United States are currently offering no-interest credit cards. Because of this, the fall and winter months will be rife with opportunity to take advantage of these offers. Some of these cards also offer introductory periods that are completely devoid of traditional fees, which makes these cards extremely attractive to just about anyone looking for a credit card.
It’s a buyer’s market for credit-card consumers now,
says credit card analyst Kin Lin. His conclusion makes perfect sense when you observe that a great number of banks and credit card companies are getting ready to release several cards aimed at the high-credit-score population. These, after all, are the customers who most often qualify for low-interest or zero-interest credit cards. Lin says that many consumers have been working towards improving their credit score and now might be the perfect time to start looking at upgrading their credit.
Credit card evaluation expert Ben Woolsey, however, warns against the difference between improving your credit and simply avoiding default. He says
It’s a big mistake for people to assume that they have great credit quality because they have never defaulted.
The truth of the matter is that your credit score is not just based on whether or not you have defaulted. Your credit score depends on how well you manage your credit activity.
Indeed, consumers should remember that keeping an eye on their credit score is the most important thing. It is not just true of periods of stability. When you get a new credit card, particularly one of the “interest-free” camp, you need to keep an eye on your credit score because although you might be saving money month in and month out by avoiding interest, if your credit score falls during the introductory period there is a very good chance you could be hit with significant interest charges in the near future. Waters attests that these interest charges could reach as high 25 percent, certainly not what “no-interest” credit card customers are looking for.
Thus, it is imperative that you maintain your credit in a responsible way. If you choose to apply for a no-interest credit card, make sure that you understand that terms and conditions. Many of these cards, for example, only offer the exceptional rate for a limited time. Also, make sure that you understand the fee structure of the card for which you are looking to apply.