It is becoming a more common practice of credit card companies to use zero percent financing to hook their customers and to gain a greater market share by luring consumers into switching credit card companies.  While this tactic can be effective for a card user it can also be very dangerous and can lead to financial disaster.

The basic trap is to get consumers to switch to their company by offering to transfer their balance from high interest cards and provide a no interest loan for a year.  This seems like a good offer, and for many card users it can be a saving opportunity.  They can manage their debt and find a way out of the mess they have found themselves in.

However, as a consumer you must be aware of the pitfalls associated with these attractive offers.  They rely on the fact that most consumers will make a mistake by breaking the terms of the contract or waiting until the year has passed and then they face not only finance charges on new purchases but on the entire balance owed. 

The percentage bumps after the first year is often very high and almost impossible to pay down.  In some cases the increase can go from zero percent one day to up to 30% the next.  Another tool they use is to is to charge exorbitant fees on late charges and over limit charges.

Breaking the terms of the agreement can be anything from being just a day late to going even one dollar over your credit limit.  So many consumers break these conditions that the credit card companies end up making huge profits because of the customer’s innocent mistakes.  They not only profit from these mistakes but factor them in when they make their fiscal budgets.  If these practices didn’t’ work and all credit card users stuck to their original intentions we would find the zero percent offer disappear very quickly.

Credit card companies can even void the contract if you decide to make extra payments to get out of debt faster.  They take their profits very seriously and get very upset when a customer refused to increase the company’s inflow of money.  With all these safeguards to protect themselves they also reserve the right to change the contract without any reason whatsoever.  It almost seems like there is no way for the consumer to win.

On one hand the consumer needs to take the responsibility of making sure that they understand the agreement completely, even the fine print.  If you follow the rules of the agreement you should be OK.  It is on the customer to make the responsible decision.  But, don’t the credit card companies themselves owe it to their customers to make an obvious full disclosure, and make sure the customer knows what he or she are getting in to?

With today’s rapidly changing economy it is more important than ever to be cautious before getting yourself into a situation that is both dangerous and potentially damaging to your credit and your lifestyle. Make sure that you choose your credit cards wisely.