Getting a credit card with an introductory 0% annual percentage rate, or APR, can be a lucrative move. Essentially, it gives you the power to make a purchase or transfer a balance without paying any interest -- as long as you pay off the balance before the promotional period ends.
Credit cards charge different interest rates for different types of transactions; you may be subject to one rate for a balance transfer and another for new charges you make online or in person. Given that the average purchase APR on a new credit card is above 19%, a 0% promotional APR on a purchase or balance transfer can help you avoid paying a significant amount of interest.
How does an introductory 0% APR work?
Purchases
When you use a credit card with an introductory 0% APR to make a purchase, your balance will not accrue interest until the promotional period ends, as long as you make all of your minimum payments on time. At that point, your regular purchase APR -- usually 19% or higher -- will begin applying to your remaining balance. As such, it’s crucial to pay off your balance in full before the promotion ends. Credit card interest can accumulate quickly.
Balance transfers
Some credit cards offer an introductory 0% APR on balance transfers, which allows you to move the balance from a card with a high interest rate. This will help you pay off your debt while you get a reprieve from interest charges. You’ll still have to be mindful to make all minimum payments on time, and pay off the balance in full by the end of the promotion if possible.
Note that you usually have a window of time to complete a balance transfer -- often 60 to 120 days -- and that a balance transfer fee, typically between 3% and 5%, may apply. Still, that’s often much cheaper than what you’ll rack up in interest charges with a credit card with a high interest rate. Note that some credit cards charge no balance transfer fees, but their introductory 0% APR promotional periods tend to be briefer.
Whether you use a 0% APR for purchases or balance transfers, there are benefits and drawbacks to consider.
Pros
Finance an unexpected or emergency purchase
Save money on interest charges
Allows for financial breathing room
Cons
Can encourage you to take on debt
Promotion ends without warning
Requires good credit
How long do 0% APRs last?
The tricky part about a 0% APR is that it’s ephemeral. Once you get past the promotional period, you’ll revert to a higher interest rate. Most introductory 0% APR periods last for 12 to 21 months. With a business credit card or student credit card, that may be only six months.
When the introductory 0% APR period ends, your balance will be subject to your card’s variable APR, which will be determined by the card’s terms and your credit profile.
Do you need to apply for a new card to qualify for a 0% APR?
While a 0% APR is typically used to incentivize applications for a new credit card, cardholders may receive a 0% APR offer for an existing account. Usually, these offers are reserved for customers with excellent credit -- that is, a credit score of 800 or higher.
The bottom line
The tricky part about a 0% APR is that it’s ephemeral. Once you get past the promotional period, you’ll revert to a higher interest rate. Most introductory 0% APR periods last for 12 to 21 months. With a business credit card or student credit card, that may be only six months.
When the introductory 0% APR period ends, your balance will be subject to your card’s variable APR, which will be determined by the card’s terms and your credit profile.
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