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7 things to know about interest-free credit cards

Get to know the fine print -- and the alternatives.

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If you're looking to start building your credit or find a card with a lower interest rate, you can look at promotional offers, like 0% interest rate credit cards.

Zero-interest credit cards are good if:

  • You want to lower your credit utilization by having more credit available to you.
  • You are going to make a large payment soon and don't want to be saddled with interest.
  • You have high-interest credit card debt you'd like to move over so you're not worried about interest continuing to add up.

Before you sign up for a 0% APR, interest-free credit card, here's what you need to know about them.

Related: How to find the hidden benefits of your credit card

1. They're good for lowering credit utilization

Credit utilization, or how much credit you've used versus how much you have available, decreases with each new line of credit you take out. A good rule of thumb is to keep your credit utilization under 30%. The more credit you have available, the lower your utilization is. 

But keep in mind that if you use the card and only make minimum payments, your credit utilization will go up, causing your credit score to go down. 

2. They're temporary

These cards are usually an introductory offer that lasts for a certain amount of time, anywhere from 12 to 21 months. After that, standard interest rates apply. In other words, good things always have an expiration date.

Before you apply for a zero-interest credit card, see how long the terms last. If you're planning on making a big purchase when you get the card, make sure the balance is paid off before the introductory offer runs out. Otherwise, you'll be on the hook for interest payments if there is a remaining balance.

3. They can lower your interest payments

If you're trying to lessen the burden of high-interest credit card debt, you can look for a 0% APR introductory offer and make a balance transfer.

The good news is that you can pay off the debt on your new card interest-free. The bad news is that you're not guaranteed to get the full balance transferred over. That means you're responsible for paying your old card, with high interest, along with your new, interest-free card, at the same time.

4. They may charge fees

Not all zero-percent interest cards are truly 0% on everything. They have to make their money from somewhere. 

While the introductory offer is nice, read the fine print. Sometimes the 0% is only on purchases. Sometimes these cards will charge a balance transfer fee when moving over your balance from one card to another. There may also be fees for making late payments, cash advances, or using overseas. Most interest-free cards do not charge an annual fee (but always check).

Since not all cards are created or managed the same way, read through all the potential offers you find. See which ones charge the most fees or the highest APR after the introductory offer expires.

5. You're still responsible for payments

While you might not get charged interest for a certain amount of time, that doesn't mean you're free from making payments at all.

If you had a balance transfer or you're using your card regularly, you're still responsible for making monthly payments. If you miss a payment, even by a day, you could face late charges and fees, as well as potentially canceling your 0% APR.

6. Not everyone qualifies

Lucrative credit card offers are not for everyone. Since there are usually minimum credit score requirements, those with poor or fair credit may not be eligible.

Before you start applying for offers, find out what your credit score is. You can typically find it for free online through your bank or current credit card company. 

As you're browsing through offers, see what the minimum score baseline is. If you don't qualify, keep searching. If you can't find anything you qualify for, it might be time to work on building up your credit score. Once you've hit a good score, you can start looking for eligible offers.

Related: The best cash back services right now | The best tax software for 2020   

7. It's not the only good offer out there

There are other good offers available, depending on what you want to take advantage of, including:

  • Cashback rewards: These cash rewards credit cards are where you earn money on the specific purchases you make, whether it's dining out, grocery shopping or getting gas. 
  • Travel perks: These can be airline credit cards or hotel-specific cards. If you travel a lot, you can earn points towards free flights, hotel stays or other destination hotspots.
  • Sign-up bonuses: These bonuses are when you get an offer for signing up with a company for the first time. These usually come with stipulations. For instance, you can receive $150 for spending $1,000 in your first three months of having your account open. 

Disclaimer: The information included in this article, including program features, program fees, and credits available through credit cards to apply to such programs, may change from time-to-time and are presented without warranty.  When evaluating offers, please check the credit card provider's website and review its terms and conditions for the most current offers and information.