Final answer:
An interest-free credit card with a 0% introductory APR on purchases is the best product for someone wanting funds to be interest free for a short period. Credit card firms offer such promotions during an above-equilibrium interest rate situation to attract more customers and move toward the equilibrium rate. Consumers should be mindful of the terms, as interest rates will revert to normal after the promotional period.
Step-by-step explanation:
If a member wants funds to be "interest free" for a short period, the best card product that would meet this want is likely to be a credit card offering a 0% introductory APR (Annual Percentage Rate) on purchases for a certain period. Many credit card companies provide these promotional offers to new customers, which can include no interest on purchases and sometimes on balance transfers for a period that typically ranges from several months up to a year or more. During this promotional period, the member can make purchases and carry a balance without incurring any interest charges, as long as they make at least the minimum payments on time. Once the promotional period ends, any remaining balance will start to accumulate interest at the standard rate.
When the market experiences an above-equilibrium interest rate, where the supply of loanable funds from credit card firms exceeds the demand from borrowers, credit card companies may offer such 0% APR promotions to attract more customers and move toward equilibrium. Consumers should be aware that after the interest-free period, the card will revert to charging interest at its regular rate, which may be higher than average. Therefore, it is beneficial for consumers to understand the terms of the introductory offer and plan accordingly to avoid incurring high interest charges.