0% APR Credit Cards: Everything You Need to Know
The Basics
A 0% APR credit card can be a boon for consumers. Have old credit card debt from other credit cards? If so, a 0% APR credit card can let you enact a balance transfer and pay down your debt without accruing new interest charges. Planning a major purchase? If so, a 0% APR credit card can buy you time to pay back that purchase without racking up interest.
Credit cards that offer 0% APRs do so for only a limited period of time. There’s no credit card that charges 0% APR indefinitely. Usually cards offer a 0% APR for a period of six, nine, 12, 15, 18 or 21 months. Once this introductory period ends, any balances you have on the card will be bumped up to a new, higher APR. Credit cards usually set an APR range. The APR you get within that range will depend on your creditworthiness.
So what makes a good 0% APR card? One factor is whether the 0% APR applies to purchases and balances transfer, just purchases or just balance transfers. Cards that apply the 0% APR to both purchases and balances are the most generous. If you have to choose one or the other, your choice will come down to whether you need the 0% APR card to pay down old balances or to minimize the financial impact of upcoming purchases.
A second factor that differentiates 0% APR cards is the length of the 0% APR period. If you have a lot of balances that you want to transfer and pay down, a longer 0% APR period will give you more time to knock out your debt.
A third factor that consumers can use to evaluate 0% APR credit cards is the APR that kicks in after the introductory 0% APR period ends. If you plan on knocking out all your debt within the introductory period and never carrying a balance after that you might not care too much about the eventual APR on the card. But if carrying a balance is a consistent problem for you, you’ll want a card with a low APR after the introductory period.
What Are 0% APR Credit Cards?
Why would a credit card company decide to offer a card with a 0% APR? Like other companies, credit card companies compete for customers. Offering an introductory period with a 0% APR is one way of attracting customers. The credit card company can then make money from fees the customers pay or from interest they pay once the 0% APR period ends.
Some 0% APR credit cards charge an annual fee but many don’t. Some offer fee-free balance transfers, but others charge a fee (either a flat dollar amount or a percentage of the transferred balance). If you have a lot of money in credit card balances that you’d like to transfer, it may be a good idea to look for a card that doesn’t charge balance transfer fees. A 3% fee on a balance of $10,000, for example, will run you $300.
A 0% APR might be great while you’re paying down old balances or paying off a major purchase, but does a 0% APR card make sense once you’re debt-free? Probably not. If you reach a point at which your old debt is down to zero and you’re confident you can pay your credit card balances in full and on time every month, you might want to opt for a rewards card or a cash back card, something that will give you a little more bang for your buck once you’re debt-free.
The Difference Between 0% APR Credit Cards and Other Credit Cards
0% APR credit cards are most often confused with balance transfer credit cards. There is some overlap between the two categories, but 0% APR credit cards and balance transfer credit cards aren’t the same thing.
Like 0% APR cards, balance transfer cards also offer a 0% APR for an introductory period. However, balance transfer cards that are marketed as such may be less likely to charge balance transfer fees than 0% APR cards are. That’s because balance transfer cards are advertising themselves as ideal for balance transfers. 0% APR cards may be targeting balance transfer customers or those who have purchases they want to charge going forward. The latter customer category wouldn’t necessarily pay a balance transfer fee and would be more focused on, say, the length of the 0% APR period.
Some rewards cards make good balance transfer cards. There are rewards cards that offer a 0% APR on balance transfers for six, nine, 12, 15 or 18 months. However, these rewards cards generally charge a regular APR on purchases, which is why they don’t count as “0% APR cards.” A 0% APR credit card is one that offers a 0% APR on purchases and balance transfers, whereas a balance transfer card only has to offer a 0% APR on balance transfers and might have a regular APR for purchases.
If you have some old balances to pay down but your current spending is under control and you know you can handle paying your credit card bill in full each month, you might want to shop for a balance transfer card with rewards rather than a 0% APR card. You could get a points or cash-back rewards card that offers a 0% APR on balance transfers. Since you’ll be paying your bill in full each month you don’t need a card that also offers a 0% APR on purchases. This gives you the flexibility to opt for a rewards card.
The same card could be considered a good 0% APR card and a good balance transfer card. For example, the Chase Slate card offers a 0% APR for 15 months on both purchases and balance transfers. Whether you want a card to pay down old balances or save on future purchases, that kind of card would be a good bet for you.
The Benefits of 0% APR Credit Cards
The benefits of 0% APR credit cards are clear from the name – you get a 0% APR. You might benefit from a 0% APR on old balances or on future purchases or both. But to get the most benefit from a 0% APR credit card you’ll want to pay down your balances before the 0% introductory period ends and the interest rate on the card jumps up.
If you’ve been struggling with credit card debt or you know you have a purchase coming up that you won’t be able to pay off completely before your credit card grace period ends, a 0% APR card could be a financial game-changer. 0% APR credit cards let you pause the clock on your credit card interest. They let you put all of your money toward paying the principal on your debt without wasting any money on paying interest.
How a 0% APR Credit Card Could Save You Money
Before you take a plunge and apply for a 0% APR credit card, it’s a good idea to evaluate whether a 0% APR credit card would really save you money. If you’re currently paying a non-zero APR on your credit card balances then it’s pretty clear that a 0% APR credit card could save you money. But if you don’t have old balances to transfer, do you need a 0% APR credit card?
Say you have a big purchase coming up. For example, you’re moving and you know you’ll want to pay the movers and buy some new furniture. Is it worth it to get a 0% APR credit card so you don’t pay interest on these purchases? The answer is: it depends.
As we’ve mentioned, your need for a 0% purchase APR depends on your ability to pay your credit card bill in full every billing cycle. If you pay anything less than the full balance (for example, you make the “minimum payment”) you’ll be accruing interest. So, to return to the example above, if you can afford to pay for your moving expenses right away you don’t really need a 0% APR credit card.
If you won’t be able to pay for that major purchase right away, you’ll have to balance two considerations: the benefit you would get from paying with a 0% APR credit card and the benefit you would get from paying with a rewards credit card. Do you want the points or cash back you’ll get for that purchase or do you want to avoid interest charges? That’s not an easy question to answer because the break-even point will vary depending on the cards and amounts in question. However, it’s generally smart to avoid credit card debt when possible because of the high APR on this kind of debt.
The problem that many consumers encounter is that they can’t predict their big expenses in time to apply for a 0% APR credit card. If you have to pay for a car repair or unexpected medical bill you might have to charge that expense to the card you have now. You probably won’t have time to apply for a 0% APR credit card and put the purchase on that card. That kind of financial jam leaves many people with credit card debt that’s racking up interest. Some of these consumers will decide to enact a balance transfer to a card with a 0% balance transfer APR in order to keep their debt from snowballing.
The Drawbacks of 0% APR Credit Cards
The drawbacks of 0% APR credit cards have more to do with features the cards don’t have than with features the cards have. What do we mean by this? Well, there’s an opportunity cost to getting a 0% APR card. If you’re using a 0% APR credit card you might not be using a card that gives you points, miles or cash back for your purchases, unless you’ve managed to find a card that offers rewards and a 0% APR.
Another drawback of the 0% APR credit card is that the introductory period is not necessarily guaranteed. Some cards reserve the right to withdraw their 0% APR offer if you miss a payment. So, you might sign up for a card that offers 15 months at a 0% APR. But if you make a late payment before those 15 months are up your card might bump you up to a higher APR. That could be a regular purchase APR of, say, 20%, or it could be a penalty APR if the card imposes a penalty APR. Penalty APRs can be closer to 30%.
If missing payments and making late payments have been problems for you in the past, it’s a good idea to avoid cards that impose penalty APRs, whether they’re 0% APR credit cards or any other kind of credit card. Penalty APRs are not just steep – they can also last for months. Your credit card company might not review your case for six months. During that time, you’ll be charged the penalty APR. If your record after your late payment is perfect, the card company might knock you back down from the penalty APR to the regular APR. But in the meantime, you will have racked up a lot of interest charges.
Paying Your 0% APR Credit Card Bill
Just because you have a 0% APR on your credit card doesn’t mean your bill will be $0. If you’re charging purchases to your card you’ll have to pay them off at the end of each billing cycle when they appear on your statement. As we’ve mentioned, missing a payment or being late with a payment can result in your credit card company revoking your 0% APR and bumping you up to a much higher APR.
From the time your credit card statement is issued you’ll have a grace period (generally 23-25 days) during which you can pay your bill without incurring interest charges. Whether or not your card comes with a penalty APR or would revoke your 0% APR for late payments it’s in your interest to pay your bills in full and on time. Doing so helps your credit score.
Combining a 0% APR With Credit Card Rewards
Want a 0% APR for balance transfers or purchases but also want to get in on the credit cards rewards trend? You might not have to choose between the two. If you have balances to transfer, you can shop for a rewards credit card that comes with a 0% introductory APR on transferred balances. If you want a 0% APR on purchases, you can find a rewards card that comes with an introductory offer. For example, the Capital One® VentureOne® Rewards Credit Card comes with a 0% introductory APR on purchases for the first 12 months you’re an accountholder.
If you’re currently paying through the roof for old credit card balances, it’s probably best to prioritize paying down your debt over racking up rewards. So, if you have to choose between a 0% APR on balance transfers and top-of-the-line credit card rewards, it’s a good idea to prioritize the 0% APR so that you can knock out your debt.
Who Should Apply for a 0% APR Credit Card?
As we’ve mentioned, customers who want a break from credit card interest are the best customers for 0% APR credit cards. If you want a break from interest that you’re currently paying on credit card balances, a 0% APR card that applies that 0% APR to balance transfers could be a lifesaver. If you want a break from future interest payments on purchases you plan to make, you’ll be in the market for a card that offers a 0% APR on purchases for six, nine, 12, 15, 18 or 21 months.
If you don’t have old credit card debt to transfer and you always pay your balance in full each month so don’t need a 0% purchase APR, you probably don’t need to shop for a 0% APR credit card. Of course, in the course of shopping for a credit card you might happen to find a points or cash-back card that offers compelling rewards and happens to have a 0% APR. But if past or future debt isn’t an issue for you, then you don’t need to base your credit card decision on the presence or absence of a 0% APR.
How to Evaluate 0% APR Credit Card Offers
If you get an offer for a 0% APR credit card in the mail, in your email inbox or in an online ad, how do you know whether it’s a good offer? SmartAsset can help you evaluate various 0% APR credit cards on the market. But it’ll also help if you have a firm grasp on why you want a new credit card.
Do you have balances to transfer? If so, make sure any 0% APR credit card you get applies the introductory 0% APR to transferred balances. And, if you can, look for a 0% APR credit card that doesn’t charge balance transfer fees.
Looking for a credit card with a 0% purchase APR? If so, you’ll also want to evaluate factors such as whether the card charges an annual fee, whether the card charges foreign transaction fees and whether the card offers any points or cash back for your spending.
All things being equal, cards with longer 0% APR periods are more enticing deal if you need help paying down old balances or avoiding interest on future purchases. But shopping for a credit card can often involve compromise. You might choose a slightly shorter 0% APR period in favor of a card that offers rewards, for example.
What Matters Most When Applying for a 0% APR Credit Card
When you’re balancing your priorities while shopping for a 0% APR credit cards, how do you decide what matters most? The answer will depend on your situation. If you know you’ll need lots of time to pay down transferred balances or pay back a future purchase, you’ll want to shop for the longest 0% APR period you can find. If you’ve struggled with late payments in the past, you’ll want to shop for a card that doesn’t have late fees and penalty APRs. It’s all about knowing what you need and shopping around until you find it.
Budgeting for a New 0% APR Credit Card
Thinking about getting a 0% APR credit card? It’s a good idea to have a plan for how you’ll use the card. With 0% APR credit cards there’s a risk that you will charge more than you would if you knew you were paying interest on your balances. You might make more purchases, or more expensive purchases, with the card, knowing you won’t accrue interest on those charges, at least during the introductory period.
If you’re going to use a 0% APR credit card for a balance transfer, it’s a good idea to put yourself on a schedule so that you’ll pay down your balances before the introductory 0% APR ends. In short, the more planning you do the better your chances of making the most out of your 0% APR credit card.
Don’t let a 0% APR lull you into a sense of complacency when it comes to credit card balances. After all 0% APRs don’t last forever. At some point, you’ll have to pay interest on any balances you have at the end of the introductory period.
If you play your cards right, a 0% APR credit card can be a big financial leg-up. 0% APR credit cards can help you tackle old debt or prevent new debt from bringing you down. It’s up to you to abide by the terms of the card and use the card to your benefit.
What to Do After Choosing a 0% Credit Card
When you think you’ve found a 0% APR credit card that will fit your needs, what’s your next step? First, it’s a good idea to make sure that your credit score meets the requirements for the credit card you’re interested in. Some 0% APR credit cards are geared toward consumers with so-so credit, but others, particularly the cards that offer generous rewards, require good or excellent credit.
It’s also a good idea to read the fine print of the card’s terms and conditions before you apply. That way, you’ll be aware of important details such as whether making a late payment will forfeit your 0% APR offer.
Applying for a credit card causes a temporary dip in your credit score. It counts as a “hard inquiry” that the credit bureaus consider to be a red flag. But don’t worry – after a successful credit card application your credit score should eventually rebound. Still, you don’t want to risk that credit score dip for a card that isn’t right for you. Before you take the time and trouble to apply for a credit card it’s a good idea to make sure the card ticks all your boxes and that you meet the credit score requirements for the card.
How the 0% APR Credit Card Process Work
If you’re getting a 0% APR credit card that offers a 0% APR on balance transfers, there will usually be a time limit on those balance transfers. What do we mean by that? Your card terms will tell you that only balances transferred within a certain number of days after you open your card account will be eligible for the 0% APR. The window you have to transfer your balances is usually 45 days. It should go without saying that it’s in your interest to transfer your balances before this window closes.
If you transfer balances, whether it’s within this window or not, you may have to pay balance transfer fees. These fees are usually somewhere around 3% of the transferred balances.
If your 0% APR credit card offers a 0% APR on purchases, you’ll have a certain number of billing cycles to benefit from that offer. As we’ve mentioned, 0% introductory APRs generally last for six, nine, 12, 15, 18 or 21 months. The clock usually starts from the day you open your account, not from the day you activate the card.
If your credit score is just OK, it’s worth trying to raise your score before the 0% APR introductory period ends. That way, when the offer expires and your credit card company bumps you from a 0% APR to a regular APR, the credit card company will give you an APR that’s on the lower end of their scale.
Should You Transfer Debt to a 0% APR Credit Card?
Is it a good idea to transfer debt to a 0% APR credit card? Assuming the 0% APR applies to balance transfers and not just purchases, transferring debt to the card could save you a lot of money. As we’ve mentioned, not all cards that offer a 0% APR on balance transfers are created equal. Some charge balance transfer fees and annual fees, while some do not. Some offer rewards and some do not.
Working within the constraints of your credit score (the best credit cards are only available to those with the highest scores), you’ll need to shop for a card that meets your needs. That means maximizing rewards and minimizing fees.
You can always transfer debt to a 0% APR credit card and use that card to pay down your debt. Meanwhile, you can use a points or cash-back card for regular spending to get credit card rewards. This strategy only works if you’re organized and solvent enough to keep up with the payments on two cards. But if you can’t find a 0% APR credit card that offers the rewards you want, you can consider using a second credit card to score rewards.
How to Use Your 0% APR Credit Card
Want your credit score to rise while you have your 0% APR credit score? We have some tips that can help you reach this goal. Of course, paying what you owe in full and on time every month is a big part of maintaining a high credit score. But it’s also smart to keep an eye on how much you’re charging to your card. To have a high credit score, it’s important to keep the ratio of the amount you charge on your card to the amount of credit you have (your credit limit) under 30% if you can. This ratio, known as the credit utilization ratio, is an important part of your credit score. So, for example, if you have one card with a $10,000 credit limit, it’s best not to charge more than $3,000 in a given billing cycle. Consumers with the highest credit scores tend to have credit utilization ratios closer to 10%.
Should You Close Your Other Credit Cards After Getting a 0% APR Credit Card?
If you’re transferring balances from other credit cards to a card that offers a 0% APR on transferred balances, you’re probably planning on closing the other cards and focusing on paying down the balances you’ve transferred to your 0% APR credit card.
But what if you don’t have balances to transfer and you’re getting a 0% APR credit card for the 0% purchase APR? You know you want to make a big purchase, or you know that money will be tight in the months to come. Either way, you know you’ll benefit from using a credit card with a 0% APR. Does that mean you should close your other credit card(s)? The answer depends on your circ*mstances.
As we’ve mentioned, you might want to use a 0% APR credit card for a balance transfer and another credit card for getting miles, points or cash back. If you can’t find a rewards card that offers a 0% APR on balance transfers you might have to use two different cards, one for each feature that you’re looking for.
If you’re worried that having more than one credit card could tempt you into overspending, you may want to close your other credit cards when you get a 0% APR credit card. If you’re getting a 0% APR credit card because you want to avoid the possibility of paying interest, swiping a card with a regular APR doesn’t really accomplish your goals anyway.
Frequently Asked Questions:
1. Who can get a 0% APR credit card?
Consumers must meet issuers’ credit score requirements to get a 0% APR credit card. Credit score requirements vary from card to card. Credit cards that offer both a 0% APR and an attractive rewards program tend to require good-to-excellent credit scores. Credit cards that are marketed to people who are struggling with credit card debt and offer a 0% credit card with no additional rewards tend to have lower credit score requirements.
2. How can I improve my credit score and qualify for a 0% APR credit card?
Don’t have a credit score high enough to qualify for a 0% APR credit card? Have a thin credit file that means you can’t apply for a credit card? There are steps you can take to put you on the path to qualifying for a 0% APR credit card.
If you already have a credit card, you can take care to pay your bill on time and in full each month and make sure your credit utilization ratio (the ratio of what you charge to your credit limit) stays below 30%. If you don’t yet have a credit card and you have a thin credit file, you may need to apply for a secured credit card before you can graduate to a 0% APR credit card.
It’s also possible that an error on your credit report is dragging your credit score down. That’s why it’s a good idea to check your credit report to see if there are any errors on your report that may be harming your score. You can dispute any errors you find with the credit bureaus. If the credit bureaus agree to remove the damaging records that are on your report in error, your score will go up.
3. How do I choose which 0% APR credit card to opt for?
We’ve talked about some of the important factors to consider when shopping for a 0% APR credit card. These include factors such as whether the card applies the 0% APR to both balance transfers and purchases, whether the card charges an annual fee and balance transfer fees and whether the card offers rewards. Another important factor to consider is the length of the 0% APR period. All things being equal, longer is better. Other factors to consider are the card issuer and how widely it’s accepted. If you travel internationally, you’ll want a 0% APR credit card that doesn’t charge foreign transaction fees.
4. Will opening a 0% APR credit card hurt my credit?
Applying for a new credit card usually causes a temporary dip in your credit score. Applying for a credit card counts as what’s called a “hard inquiry” into your credit. Credit bureaus look askance at consumers who have too many applications for new credit in a short period. They see recent credit applications as a sign that a consumer might be desperate for credit because he or she is spending above his or her means.
However, once you have successfully applied for and started using your new 0% APR credit card your score should rebound, assuming you pay your bills in full and on time and you keep your credit utilization ratio under 30%.
If you think your credit score isn’t quite high enough for your 0% APR credit card application to be a sure thing, you might want to work on building up your score before you apply for a 0% APR credit card. That way, you won’t risk the dip in your credit score caused by applying for a new card only to have your application be rejected.
5. What kind of fees should I look out for?
Credit card fees can add up quickly. When you’re shopping for a 0% APR credit card, some fees to look out for are: balance transfer fees, annual fees, late payment fees, returned payment fees, foreign transaction fees and cash advance fees.
If you are getting a 0% APR credit card for the purposes of a balance transfer, balance transfer fees are particularly worth looking out for. That’s not to say that you shouldn’t get a card with a balance transfer fee, however. You might find that it’s worth paying a balance transfer fee for a card with a particularly long 0% APR period, for example. You’ll have to weigh the pros and cons of the cards you’re evaluating.
As we’ve mentioned, those who have struggled with missed payments and late payments should be wary of cards that charge late payment fees and impose penalty APRs. And if you’re going to be using your card abroad, you’ll probably want to avoid cards that charge a foreign transaction fee. However, fees are lucrative for credit card companies, so cards that don’t charge any fees at all are hard to come by. And if you want a card that offers both a 0% APR and rewards like points, miles or cash back you might have to pay an annual fee for the privilege of using that card.
6. Should I use my 0% APR credit card to get a cash advance?
We’ve mentioned that cash advance fees are one kind of fee to look out for when evaluating credit cards. In general, a credit card cash advance is an expensive way to get your hands on some cash. Most credit cards charge a cash advance fee (often around $35), but they also impose interest on the cash you take out. That interest is applied right away, without a grace period. Often, the APRs on cash advances are higher than the regular purchase APR on a credit card. We get that sometimes people need cash in a hurry and don’t have great options, but it’s still important to note that a credit card cash advance is a costly way to get cash.
7. Should I pay an annual fee for a 0% APR credit card?
Is it worth paying an annual fee for a 0% APR credit card? That depends. If the card offers rewards like points, miles or cash back and comes with a 0% APR on purchases and/or balance transfers, that card might be worth an annual fee. But if you don’t need rewards and all you want is a card with a 0% APR you probably don’t need to pay an annual fee.
There are plenty of 0% APR credit card that don’t charge an annual fee. Because credit card companies know that the consumers likely to want a 0% APR credit card are also likely to be on a budget, they offer cards with no annual fees in this category.
8. How can I find the right 0% APR credit card for me?
Want to be sure you choose the right credit card for you? Taking stock of your financial needs is a good first step. Do you have old credit card debt you’re struggling to pay down? Are you anticipating a major expense that you might struggle to afford? Is a decrease in your income making it hard to keep up with bills? If so, a 0% APR credit card could be a better fit for you than a credit card with a regular APR.
To find the right 0% APR credit card for you, look for a long introductory period and low fees. If you want rewards and have a credit score high enough to qualify for a card that offers both a 0% APR and rewards, even better.
9. How can I avoid paying interest on my 0% APR credit card?
If you’re not familiar with credit cards you might be wondering how to avoid paying interest on your credit card. For one thing, you can avoid getting a credit card cash advance. If you use your 0% APR credit card (or any credit card) to get a credit card cash advance you’ll start paying interest on that cash right away. There’s no grace period.
What’s a grace period? With normal purchases (not cash advances), your bill will go to statement at the end of each billing cycle. You’ll then have a grace period (usually 23-25 days) during which you can make your payment without incurring late payment fees or accruing interest on your statement balance. As long as you pay your balance on time and in full at the end of each billing period and within the grace period you won’t pay interest on your credit card purchases.
Of course, during the 0% APR period on your card you won’t accrue interest, but it’s still in your interest to pay your balance in full within the grace period. Doing so will keep your credit score high. Once the 0% APR period ends and your purchase APR goes up to a regular percentage, it’ll be extra important that you make full payments within the grace period. Doing anything less will cost you money in interest and you’ll be in credit card debt.
10. How can I make the most of a 0% APR credit card?
How do you measure a successful use of a 0% APR credit card? The best outcome for a 0% APR credit card is that you’ll be debt-free at the end of the 0% APR introductory period. If you’re transferring balances to a 0% APR credit card, ideally you’ll pay those balances down before the 0% APR expires. If you got a 0% APR credit card because you wanted a 0% APR on your purchases, the same applies. The best-case scenario is that you’ll end the 0% APR period with $0 in credit card balances. That way, when your 0% APR offer ends and your APR jumps, you won’t be racking up interest charges that drain your bank account.
You can also make the most of your 0% APR credit card by using it to attain or maintain a high credit score. That means paying your bills in full and on time each month and keeping your credit utilization ratio below 30%.
If you have a 0% APR credit card that offers rewards, you can optimize those rewards. If it’s a cash-back card that offers bonus categories each quarter you can activate your spending in the relevant quarter and get your cash-back rewards. If it’s a card that offers points or cash back and has a sign-up bonus you can make sure you meet the spending limit needed to get the bonus. For example, a card might give you 5,000 bonus points when you spend $1,000 in the first 90 days you have the account. If that $1,000 is in your budget why not make sure you spend it in time to get the bonus?
The more you know about your 0% APR credit card the easier it will be for you to get the most of it and avoid pesky fees and charges.
Final Thoughts
0% APR credit cards can be a great way to pay down past debt or avoid future debt. Ideally, no one would carry a monthly balance but we all know how easy it is to wind up with credit card. If you need time to tackle past balances or pay down future spending, a period with a 0% APR lets you press the pause button on credit card interest. If your credit score is high you may be able to a score a 0% APR credit card that also offers perks like points or cash back.
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