10 Things You Should Know About 0% APR Credit Cards
Do you understand how intro APR periods work?
- March 4, 2020
- Credit Cards
- 5 min read
You're our first priority. Every time.
We believe everyone should be able to make financial decisions with confidence. And while our site doesn’t feature every company or financial product available on the market, we’re proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward — and free.
So how do we make money? Our partners compensate us. This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Bottom line? We’re on your side, even if it means we don’t make a cent.
Credit cards that have a 0% introductory annual percentage rate (APR) offer are powerful financial management tools — if you know how to use them. They can help you pay down debt in record time or finance a large purchase without paying for expensive interest. In short, these are money-saving machines that fit inside your wallet.
While 0% APR credit cards can be great tools, it’s important you know the ins and outs of typical offers, how they work and how to maximize the benefits. If you use it incorrectly, you could lose the perk altogether.
Here are 10 facts about 0% APR cards that will help you put your credit card to good work:
1. There Are Several Different No Interest Offers from Credit Cards
A single credit card can have several different APRs for different types of transactions. For example, a credit card commonly has a purchase APR, a balance transfer APR and a cash advance APR. Many credit card companies offer promotions in which you get 0% APR for a certain period of months — but which type of APR is set at the promotional rate is key.
Some of the best 0% APR credit cards are those that include both purchases and balance transfers in the introductory offer. That means you can transfer a balance from another card or make a large purchase and pay it off over time without paying interest. Not all cards offer both, though, so double check the fine print before you apply or swipe. If you can’t get both, having a credit card with 0% APR on purchases or 0% APR on balance transfers alone is a huge plus. Choose the card with the right offer for your financial needs.
2. A True 0% APR Offer Doesn’t Come with Retroactive Interest
A true 0% APR introductory offer is different from a deferred interest offer. Some 0% APR intro offers wipe the slate clean on interest completely, which means even if you don’t pay off the total balance transfer or purchase within the introductory period, you don’t pay retroactive interest on it. You simply start paying the regular interest for the remaining balance moving forward. Fortunately, retroactive interest policies like this tend to occur mostly with retail credit cards rather than credit cards issued by a bank.
3. Miss Monthly Payments And You Could Lose Your 0% APR
Many cards revoke the 0% offer if you’re late on a monthly minimum payment, so make sure you stay current to keep your promotional rate intact. What’s more, most if not all credit cards come with a penalty APR rate. If you are delinquent on monthly payments, a penalty APR substantially higher than the standard APR can kick in, costing you even more money.
4. Some Balance Transfer Offers Come with Fees
It’s common for credit cards to charge a fee for balance transfers. Banks typically charge between 3 percent and 5 percent of the transfer total to move a balance from one card to another. So, for example, if you move $5,000, you could pay $150 to $250. Since you could save hundreds more by not paying interest, you still usually come out ahead in spite of these fees.
5. Balance Transfer Offers Usually Come with a Time Limit
Promotional introductory balance transfer offers stipulate that the balance transfer has to happen within a certain amount of time of opening the account. The good news is that plenty of credit cards exist with fairly generous windows of time. On the low end, credit cards may offer six months of 0% APR on balance transfers. However, very often you can find balance transfer offers that run into 12 months, 15 or even 18 months. Every once in a while, you can find a 0% APR balance transfer credit card with a period of 21 months.
6. Some Credit Cards Don’t Advertise Their 0% APR Offer
Generally, credit cards will put their 0% APR introductory offer front and center on their websites. However, it’s not uncommon for a credit card’s other features to crowd the web page, such as high-percentage cash-back rewards or travel rewards. Read the full web page and check out the fine print on any card you’re interested in. If you can get a 0% APR offer on top of getting other perks like rewards or cash-back offers, the savings can really add up.
7. Credit Scores Matter — A Lot
Many experts will say you need a minimum credit score of 670 to be approved for these types of cards, though individual details and factors also come into play. Unfortunately, many people don’t appreciate how easy it is to have a low credit score. Seemingly minor setbacks like a utilities bill going to collections or even one late credit card payment can wreak havoc on your credit score and, therefore, your chances of getting a credit card. Cards with the best promotions and rewards are typically reserved for those with the best credit scores, so the better the card, the harder it can be to get approved.
Looking for a startup business loan to launch or grow your business? Contact us today to see how we can get you the money you are looking for.
8. Introductory Offers Can Be a Great Way to Finance Big-Ticket Items
If you find a promotional 0% purchase APR offer, then you could be in a great position spending-wise. You can buy something expensive — up to the value of your credit line on the card — and pay it off over the promotional period without the added cost of interest. These cards are a great way to finance things like vacations, furniture, minor home upgrades, office equipment and computers, for example. Just be sure to mark your calendar so you know exactly when your interest rate kicks in.
9. You Can Save Tons Using O% APR Periods
You can save hundreds using a 0% APR promotional offer on a balance transfer. For example, if you transfer a balance of $5,000 from a card where you were paying 18% APR to a card with a 21-month 0% introductory offer, here’s the difference:
- On the 0% APR credit card, you can make 21 payments of $238.10 for a total payment of around $5,000.
- On the 18% APR credit card, if you make minimum monthly payments, you’ll pay on the card for 26 months for a total of $6,190.34, including $1,050.73 in interest.
- The difference is equivalent to $1,190.34
Don’t underestimate what you can save through a combination of responsible money habits and promotional offers.
10. Cash Advance APRs Tend to Be High
Excluding penalty APRs, cash advance APRs tend to be the highest APRs on credit cards. Usually, the cash advance APR is higher than the upper range of the purchase APR or balance transfer. This makes cash advances an expensive way of using credit cards. What’s more, there is no grace period with cash advances, so daily interest charges start accumulating immediately. Using your credit card for cash advances should be limited to short-term, emergency cash situations.
More From Seek
- Are Rewards Credit Cards Worth More Than Cash-Back Credit Cards?
- The Fed’s Latest Interest Rate Decision Revealed
- How to Increase Your Credit Limit
Business Loan Resources
Photo credit: designer491/Shutterstock.com
Best Startup Loans of 2020 - Get Between $5,000 and $500,000
Get more great articles straight to your inbox!
Let us make it up to you with better articles straight to your inbox.
Recommended For You
The average American has $6,194 in credit card debt, according to Experian. If you, like many Americans, are paying the standard purchase rate on your debt — often near 18% — it will take considerable time to pay it off. For example,... Read More
- July 8, 2020
- Credit Cards
- 6 min read
Choosing the wrong credit card can cost you money. You might not read the fine print before you use it and get hit for unanticipated charges. You might not have appreciated how much your credit card APR matters as you... Read More
- June 9, 2020
- Credit Cards
- 5 min read
A line of credit and a credit card are both forms of a loan: You borrow money from a lender or credit card issuer and then repay the balance plus interest. However, both lines of credit and credit cards are... Read More
- March 23, 2020
- Credit Cards
- 7 min read
Credit unions are a popular alternative to using traditional banks for financial needs. In recent years, however, the growth of online banks and lenders has increased competition, cutting into the credit union’s market. Even so, for many Americans, credit unions... Read More
- March 10, 2020
- Credit Cards
- 4 min read