Low interest and 0% introductory rates for credit cards have been around for quite a while but not so long ago (a mere fifteen years or so) you had to take a one size fits all rate determined by the bank – typically 18% and pay a $20 annual fee for the privilege. Today it is almost uncommon to find a credit card that doesn’t offer at least some type of incentive rate during the first 6 or 12 months of getting the card. The most popular credit card deals offer a 0% APR on credit card purchases and balance transfers for at least one year. Consumers have come to take these “teaser” rates for granted and tend to shop for 0% credit cards based on these rather than the permanent or “go to” APR. The use of the low APR teaser rates (so called because they lured cardmembers into taking the credit card offer and then the rates would go up dramatically soon thereafter) were pioneered with the advent of the monoline bank (a bank that only issued credit cards and didn’t take deposits or make other types of loans). This new breed of credit card bank came on the scene in the late 1980’s and made full use of newly available consumer credit databases to make targeted offers to different populations based on risk.
The 1980’s were also the first time that mass direct mail campaigns were used to solicit millions of consumers for credit cards at once across the United States. Once the genie was let out of the bottle with low interest introductory rates it was impossible to get it back it seems, so what was intended to be a novel but temporary marketing gimmick has proven to be an ongoing cost of doing business for the credit card banks. Unless you revolve a credit card balance from month to month, even a 0% credit card intro rate isn’t that appealing, but if you are transferring balances from another high rate credit card or need to do some short-term borrowing it can really provide some much-needed financial breathing room.
Some fads like the pet rock don’t stick around for very long but low interest introductory rates, even at 0% APR, appear to be a semi-permanent part of the credit card industry in America. But as with many things that are taken for granted they may not last forever.
