Would you like to get an interest-free loan to pay off debt or cover a major purchase this year? It’s not as far-fetched as you might think if you know how to strategically use a 0% introductory credit card.
Credit cards that offer an introductory 0% APR allow you to carry a balance for a specified period of time, typically nine to 21 months, without earning interest. Depending on the card type, you may be able to make new purchases, transfer balances from another account, or both.
Since the average credit card interest rate is currently over 20%, which can mean thousands of dollars in savings. Just make sure you have a plan to pay off your balance before the promotional period ends, otherwise interest will start to accrue on the remaining balance.
If you carry a balance on your card, want to save money, or simply need a break from interest charges, here’s how to take advantage of these promotional offers, along with other options to consider.
What does a 0% introductory APR mean?
A 0% APR introductory offer technically means that the annual percentage rate on your credit card is 0% for an introductory period specified during account opening. After this window closes, the regular variable APR will apply to any outstanding balance you maintain on your card.
The actual length of the 0% APR period and the type of transactions it applies to will depend on the card. Introductory periods may apply to new purchases, balance transfers or both. If the card offers an introductory period on new purchases, you won’t accrue interest on those particular transactions. You will still have to take the required steps minimum monthly payments and repay the balance before the end of the promotional period.
If the card offers a promotional period for balance transfers, you won’t accrue interest on balances you transfer from other credit cards. You’ll probably still have to pay a balance transfer fee.
What are balance transfer fees?
A balance transfer offer (or card) can help you reduce the amount of interest you pay on credit card debt you already have. To take advantage of a 0% APR balance transfer offer, you’ll typically have to pay a balance transfer fee (usually 3% to 5% of the total balance you’re transferring) or a flat fee – usually, depending on the amount the highest. .
If your 0% APR introductory offer has a balance transfer fee, you’ll be charged each time you move a balance to the card. Keep this in mind when deciding whether transferring your credit card debt will actually save you money or just increase the balance you want to pay off.
How does a 0% APR introductory offer work?
If you’re considering using a card’s 0% introductory period, make sure you understand what purchases or transfers qualify. This way, you can start taking advantage of the offer as soon as you are approved. Also find out if the promotional offer applies to new purchases, balance transfers, or both.
There may also be additional rules regarding how long you have to make balance transfers. For example, some credit cards may offer an introductory APR of 0% for the first year or more, but any balance transfers must be completed within the first few months.
Just because it’s a 0% APR card doesn’t mean it’s free. Fees may still be charged for late payments, cash advances and foreign transactions. Many of these fees may apply during the 0% introductory period, including balance transfer fees.
It’s also important to understand the consequences if you don’t make at least your minimum payments during the promotional period. Most 0% APR offers include steep fees for late payments, and some credit card issuers may cancel the 0% APR promotional offer or apply a higher APR penalty. if you miss payments. Depending on the issuer’s terms, you may start earning interest on your balance immediately. Read the fine print of any agreement before signing.
Is a 0% APR offer the same as deferred interest?
Retailers advertising “no interest if paid by date x” are referring to a deferred interest offerwhich is different from a 0% APR offer. With a deferred interest offer, you won’t owe any interest if you pay off your balance in full before the end of the promotional period. If you fail to cover the entire balance before the end of the promotional period, then the interest you carried forward will be added to your balance.
On the other hand, with a 0% APR offer, as long as you make the required minimum payments, you will begin to accrue interest on the remaining balance only once your introductory period is over.
Here’s one way to look at it: If you have any doubt about your ability to pay off your balance before the end of the promotional period, opt for a 0% APR introductory offer instead of an interest offer deferred.
What happens at the end of a 0% APR period?
Credit cards with a 0% APR introductory offer only lasts for a while — usually between nine and 21 months. After that, a variable APR will apply and any outstanding balance will benefit from this higher interest rate.
If you are unable to pay the remaining balance before the end of the promotional period, you have several options. One is to do another balance transfer and move your remaining balance to the new card so you have more time to pay off your debt. Another option is to apply for a fixed rate personal loan.
7 Things to Know About 0% APR Credit Cards
1. Introductory offer may apply to new purchases or balance transfers
Before applying for a card with a 0% APR introductory period, find out if it applies to new purchases, balance transfers, or both. Check which qualifying purchases or transfers qualify so you can start taking advantage of the offer as soon as you’re approved.
2. 0% introductory interest periods vary
Credit cards with an introductory 0% APR offer last a while, usually between nine and 21 months. Then a variable interest rate applies. Any unpaid balance will start accruing interest after that.
Before you apply, see how long the 0% APR introductory offer lasts. If you’re planning to make a large purchase or transfer debt to take advantage of a 0% interest rate, make sure the balance is paid off before the introductory offer ends. If possible, choose a card with the longest introductory period.
3. A balance transfer card can help you pay off debt and reduce interest
If you’re trying to reduce the interest you pay on your credit card balance, a balance transfer card allows you to transfer the debt to a new card with a lower interest rate introductory offer. Plan to pay off the balance in full before the offer ends to avoid ending up with a higher variable interest rate.
4. Some 0% introductory offers come with fees
If you transfer a balance, you may be charged a balance transfer fee ranging from 3% to 5% of the amount. Depending on the amount of debt you need to transfer, you may need to do several transfers over time and pay multiple balance transfer fees.
Although an introductory offer of 0% APR may seem attractive, always read the fine print. You may also have late payment, cash advance, and foreign transaction fees that may still apply during the introductory period.
5. You are still responsible for monthly payments
You won’t be charged any interest during your card’s introductory period, but you will need to make monthly payments to keep your account current. Missing a payment or paying late can result in expensive fees and may completely void your 0% APR offer, depending on your issuer’s terms. You can even start accruing interest at a higher penalty rate on your balance right away.
6. You usually need good or excellent credit to get approved
Many credit card offers, like interest-free periods and rewards, require a good to excellent credit score, which is typically between 670 and 850.
When browsing offers, check what the minimum credit score requirement is. If it doesn’t seem like you qualify for any balance transfer offers, consider build your credit score. You can start with a credit card, such as a secured credit card, to establish good credit habits, such as paying your bill in full and on time each month. As your score increases, you’ll be able to qualify for a 0% APR card and other cards with rewards and perks.
7. Don’t cancel your credit card once you’ve completed the 0% APR introductory period
Canceling a credit card can hurt your credit scoreso it is better to keep the account open and continue making payments on time. When comparing introductory 0% APR credit card offers, also look at rewards and cash back offers. If you plan to continue using the card, you could earn rewards on your purchases in the future.
FAQs
Does 0% APR mean no monthly payment?
You must always make at least the minimum payment each month. A 0% APR offer only means that you will not accrue interest on your balance during the promotional period. Depending on your issuer’s terms, your credit card company may charge you fees and even cancel your 0% APR offer if you don’t make the minimum payment on time.
How to make the most of 0% APR offers?
Take advantage of the 0% promotional period to pay off your balance as much as possible. If you can pay off the balance in full before the end of the promotional period, you will avoid paying the higher variable interest on the remaining balance.
Does missing a payment on a 0% APR credit card hurt your credit score?
As with any credit card, late or missed payments will show up on your credit report and hurt your credit score.
