A 0% intro APR credit card can help you save on interest as you pay off debt or finance a large purchase. But be aware of these caveats.
How’d you like an interest-free loan to pay off your credit card balance or to furnish a new apartment? It’s not as far-fetched as you might think, if you know how to strategically use a 0% introductory APR credit card.
By using a 0% intro APR card for big purchases or balance transfers, you’ll avoid having to pay interest on your credit card balance for a fixed period of time. Given that average interest rates on credit cards are currently more than 20%, that can mean thousands of dollars in savings. Just make sure you have a plan to pay off your balance before the promotional period ends, typically after nine to 21 months.
Read more: Best Balance Transfer Credit Cards for April 2024
If you’re carrying a balance on your card, want to save money or just need a break from interest charges, here’s how to take advantage of these promotional offers, as well as some other options worth considering.
What does 0% intro APR mean?
A 0% intro APR offer technically means the annual percentage rate on your credit card is 0% for a specified introductory period upon opening the account. After that window closes, the regular variable APR will apply to whatever outstanding balance you keep on your card.
The actual length of the 0% APR period, and what kind of transactions it applies to, will depend on the card. Introductory periods can 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. But you’ll still have to make the required minimum monthly payments and repay the balance before the promotional period ends.
If the card offers a promotional period for balance transfers, you won’t accrue interest on the balances your transfer from other credit cards. But you’ll still likely have to pay a balance transfer fee.
What are balance transfer fees?
A balance transfer offer (or card) can help you reduce how much interest you’re paying on credit card debt you already have. To take advantage of a balance transfer 0% APR offer, you’ll usually have to pay a balance transfer fee (typically 3% to 5% of the total balance you’re transferring) or a flat fee -- generally, whichever is greater.
If your 0% introductory APR offer has a balance transfer fee, you’ll be charged each time you move a balance to the card. Keep that in mind when deciding if transferring your credit card debt will actually save you money or just add to the balance you want to pay off.
How does a 0% APR intro offer work?
If you plan to use a card’s 0% introductory period, make sure you understand what purchases or transfers qualify. That way, you can start taking advantage of the offer as soon as you’re approved.
Also find out whether the promotional offer applies to new purchases, balance transfers or both. Some cards like the Wells Fargo Active Cash® Card have a 0% intro APR for 15 months from account opening on new purchases and qualifying balance transfers (after that, your variable APR will be 20.24%, 25.24%, or 29.99%, depending on your creditworthiness). But the Citi Double Cash® Card offers a 0% intro APR for 18 months on balance transfers only, not new purchases (after that your APR will be 19.24% to 29.24%, variable; balance transfers must be completed within the first four months of account opening).
There may also be rules for how long you have to make balance transfers. For instance, the Bank of America® Unlimited Cash Rewards credit card* offers new cardholders 0% introductory APR for the first 15 billing cycles for purchases and balance transfers before the variable APR of 18.24% to 28.24% applies, but all balance transfers must be made in the first 60 days of account opening.
Just because it’s a 0% APR card doesn’t mean it’s free of fees. There could still be fees for late payments, cash advances and foreign transactions. Many of these fees may apply during the 0% introductory period.
If you’re using a 0% APR credit card to transfer your existing credit card debt, then balance transfer fees may apply (typically 3% to 5% or a flat-rate fee).
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 hefty fees for late payments, and some credit card issuers might cancel the 0% APR promotional offer or apply a higher penalty APR if you miss payments. Depending on the issuer’s terms, you could start to incur interest on your balance immediately. Read the fine print in any agreement before you sign.
Is a 0% APR offer the same as deferred interest?
Retailers advertising “no interest if paid by x date” are referring to a deferred interest offer, which is different from a 0% APR offer. With a deferred interest offer, you won’t owe any interest if you pay off your entire balance by the end of the promotional period. However, if you fail to cover the entire balance before the promotional period ends, the interest you deferred will then be added to your balance.
With a 0% APR offer, on the other hand, as long as you make the required minimum payments, you’ll start accruing interest on the remaining balance only once your introductory period is up.
Here’s a way to look at it: If you have an ounce of doubt that you’ll be able to pay off your balance before the promotional period ends, go with a 0% intro APR offer instead of a deferred interest offer.
What happens when a 0% APR period ends?
Credit cards with a 0% APR introductory offer last only a certain amount of time -- usually between nine and 21 months. After that, a variable APR will apply, and any outstanding balance will get that higher interest rate.
If you aren’t able to pay off the remaining balance by the end of the promotional period, you have a few options. One is to do another balance transfer and move your remaining balance to the new card so you have additional time to pay off your debt. Another option is to apply for a fixed-rate personal loan or debt consolidation loan.
7 things to know about 0% APR credit cards
1. The introductory offer may apply to new purchases or to 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. Review what eligible purchases or transfers qualify so you can start taking advantage of the offer as soon as you’re approved.
2. Introductory 0% interest periods vary
Credit cards with a 0% APR introductory offer last a certain amount of time -- usually between nine and 21 months. After that, a variable interest rate applies. And any outstanding balance will start accruing interest after that.
Before you apply, see how long the 0% APR introductory offer lasts. If you’re planning on making a big purchase or transferring debt to take advantage of 0% interest, make sure the balance is paid off before the introductory offer runs out. If possible, choose a card with the longest introductory period.
3. A balance transfer card can help you repay debt and reduce interest
If you’re trying to cut down the interest you’re paying on your credit card balance, a balance transfer card lets you move the debt to a new card with a lower-interest introductory offer. Make a plan to pay off the balance in full before the offer ends to avoid being hit with a higher variable interest rate.
Read more: Best Credit Cards With No Balance Transfer Fees
4. Some 0% introductory offers come with fees
If you’re transferring a balance, you may have to pay a balance transfer fee of 3% to 5% on the amount. Depending on how much debt you have to transfer, you may have to make multiple transfers over time and pay several balance transfer fees.
Though a 0% introductory APR offer may sound nice, always read the fine print. You may also have fees for late payments, cash advances and foreign transactions that could still apply during the introductory period.
5. You’re still responsible for monthly payments
Even though you won’t be charged interest during your card’s introductory period, you’ll need to make monthly payments to keep your account current. Failing to make a payment or paying late can mean burdensome charges and may cancel out your 0% APR offer altogether, depending on your issuer’s terms. You could even start accruing interest at a higher penalty rate on your balance immediately.
6. You usually need good or excellent credit for approval
Many credit card offers, like interest-free periods and rewards, require a good to excellent credit score, which is usually 670 to 850.
As you’re browsing offers, see what the minimum credit score requirement is. If it doesn’t seem like you’ll qualify for any balance transfer offers, consider building up your credit score. You can start with a credit-building card, like a secured credit card, to establish good credit habits like paying your bill in full and on time each month. As your score grows, 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 after you’re done with the 0% intro APR period
Canceling a credit card can hurt your credit score, so it’s best to keep the account open and continue to make on-time payments. As you’re comparing 0% intro APR credit card offers, also look at any rewards and cash back offers. If you plan to continue using the card, you could earn rewards on your purchases going forward.
The bottom line
Credit cards with 0% APR introductory periods can work in your favor if you need more time to pay off a big purchase. They’re also one way to cut down on the interest you’re paying on existing credit card debt.
But before you choose a credit card with an interest-free period, pay close attention to how long the offer lasts and any balance transfer fees. Then, come up with a plan to pay the balance off in full to avoid paying any interest later on. Lastly, think about how this card can be valuable after the introductory period is over.
FAQs
You still must make at least the minimum payment each month. A 0% APR offer only means you won’t accrue interest on your balance during the promotional period. Depending on your issuer’s terms, your credit card company can charge you fees and even cancel your 0% APR offer if you don’t make the minimum payment on time.
Use the 0% promotional period to pay off as much of your balance as possible. If you can pay the entire balance before the promotional period ends, you’ll avoid paying the higher variable interest on the remaining balance.
Just like with any credit card, making late payments or missing payments will show up on your credit report and hurt your credit score.
*All information about the Bank of America® Unlimited Cash Rewards credit card has been collected independently by CNET and has not been reviewed by the issuer.
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