How a 0% Intro APR Credit Card Can Help You Avoid Skyrocketing Interest Rates This Year

How would you like an interest-free loan to pay off debt or cover a big purchase this year? It’s not as far-fetched as you might think if you know how to strategically use a 0% introductory APR credit card.

Credit cards that offer a 0% introductory APR allow you to carry a balance for a set period, usually nine to 21 months, without accruing interest. Depending on the type of card, you may be able to make new purchases, transfer balances from another account, or both.

Given that average credit card interest rate it’s currently more than 20%, which could mean thousands of dollars in savings. Just make sure you have a plan to pay off your balance before the promotional period ends, or interest will start to accrue on the remaining balance.

If you have 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% introductory APR offer technically means annual percentage rate on your credit card is 0% for a certain introductory period when opening the account. Once this window closes, the normal variable APR will apply to the outstanding balance you hold 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 may apply to new purchases, balance transfers or both. If the card offers an introductory period for new purchases, you won’t be charged interest on those particular transactions. Still, you’ll have to do what’s necessary minimum monthly payments and pay off the balance before the end of the promotional period.

If the card offers a promotional balance transfer period, you won’t be charged interest on balances you transfer from other credit cards. You will still likely have to pay a balance transfer fee.

What are the balance transfer fees?

A balance transfer (or card) offer can help you lower the interest you pay on the credit card debt you already have. To take advantage of the 0% APR balance transfer offer, you’ll usually have to pay a balance transfer fee (usually 3% to 5% of the total balance you’re transferring) or a flat fee – usually whichever is greater .

If your introductory 0% APR offer has a balance transfer fee, you’ll be charged every 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 add to the balance you want to pay off.

How does the 0% APR introductory offer work?

If you plan to take advantage of the 0% introductory period on a card, make sure you understand what purchases or transfers are eligible. 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 about how long you have to make balance transfers. For example, some credit cards may offer 0% introductory APR for the first year or more, but all balance transfers must be made within the first few months.

Just because it’s a 0% APR card doesn’t mean it’s fee-free. There may still be fees for late payments, cash advances and foreign transactions. Many of these fees may apply during the 0% introductory period, including balance transfer fees.

It is also important to understand the consequences if you do not make at least your minimum payments during the promotional period. Most 0% APR offers include hefty late payment fees, 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 and conditions, you can start earning interest on your balance immediately. Read the fine print in any agreement before you sign.

Is the 0% APR offer the same as deferred interest?

Retailers advertising “no interest if paid by date x” mean 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 entire balance by the end of the promotional period. If you fail to pay off the entire balance before the end of the promotional period, your deferred interest will 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 only the remaining balance after your introductory period is over.

Here’s one way to look at it: If you have an ounce of doubt that you’ll be able to pay off your balance before the end of the promotional period, choose a 0% introductory APR offer instead of a deferred interest offer.

What happens when the 0% APR period ends?

Credit cards with a The 0% APR introductory offer lasts for a limited time only — usually between nine and 21 months. A variable APR will then apply and any outstanding balance will receive that higher interest rate.

If you are unable to pay off the remaining balance by 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 to give you extra time to pay off your debt. Another option is to apply for a personal loan with a fixed interest rate.

7 things you need to know about 0% APR credit cards

1. Introductory offer can be applied 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. Review which eligible purchases or transfers are eligible so you can start taking advantage of the offer as soon as you’re approved.

2. Introductory 0% interest periods vary

Credit cards with an introductory 0% APR offer last for a set period of time – usually between nine and 21 months. A variable interest rate then applies. Any unpaid balance will begin to accrue interest thereafter.

Before you apply, see how long the introductory 0% APR offer lasts. If you’re planning to make a big purchase or transfer debt to take advantage of 0% interest, make sure the balance is paid off before the introductory offer expires. If possible, choose a card with the longest introductory period.

3. A balance transfer card can help you pay off debt and lower interest

If you’re trying to lower the interest you pay on your credit card balance, a balance transfer card lets you move the debt to a new card with a lower interest rate 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.

4. Some 0% introductory offers come with fees

If you are transferring a balance, you may have to pay a balance transfer fee of 3% to 5% of the amount. Depending on how much debt you need to transfer, you may have to multiple transfers over time and pay few balance transfer fees.

While an introductory offer of 0% APR may sound good, 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 the monthly payments

You won’t be charged interest during your card’s introductory period, but you’ll need to make monthly payments to keep your account current. Failure to make a payment or late payment may result in onerous fees and may void your 0% APR offer entirely, depending on your issuer’s terms. You can even start charging 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, such as interest-free periods and rewards, require a good to excellent credit score, typically 670 to 850.

While looking at offers, see what the minimum credit score requirement is. If it doesn’t look like you qualify for balance transfer offers, think about it building your credit score. You can start with a credit-building 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 rises, you’ll be able to qualify for a 0% APR card and other rewards and benefits cards.

7. Don’t cancel your credit card after you’re done with the 0% APR intro period

Canceling a credit card can hurt your credit scoreso it is best to keep the account open and continue to make timely payments. While you’re comparing 0% intro APR credit card offers, also look into any rewards and cash back offers. If you plan to continue using the card, you can earn rewards on future purchases.

Frequently asked questions