Credit card wars are heating up across the country. Now more than ever, credit card companies are turning to extended introductory offers geared toward new credit card customers. The new hot trend is in zero interest credit cards.
Credit cards are known for issuing cards with teaser rates - rates that are set to expire after a few months to two years of card ownership. The idea is simple: subsidizing consumers’ purchases may reward a credit card company with loyalty and substantial balances at non-introductory rates.
Forty percent of all credit card issuers now have a product with zero percent interest introductory periods. Some even up the ante with balance transfer offers plus a slew of sign up bonuses that can quickly top $100 cash, or more.
Credit card companies have plenty of incentive to offer introductory APRs to consumers. Consumer advocates report that as many as 60% of new customers fail to make payments during the introductory period and therefore lose the promotion. The result is a much higher credit card rate known as the default rate. The industry standard for default rates is 29.99% per year, the usury limit in most US states.
Not only are introductory zero percent cards becoming more common, but the introductory periods are also getting longer. In 2009, at the height of the credit crisis, banks offered an average of nine months of zero interest to their new customers. In 2012, the average soared to 14 months, indicating that the 12 and 18-month promotions are quickly catching on as a new industry standard.