10 Things You Should Know About 0% APR Credit Cards

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.

Read: How to Apply for a Credit Card

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.

Read: Can’t Get a Business Bank Loan? Here Are 3 Alternatives

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.

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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.

Learn: How Credit Card Interest Work

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.

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