Great 0 percent APR credit cards let you take between 15 and 24 months to pay off a financed purchase without any additional interest cost. If you handle your purchase and credit card balance the right way, your large purchase won’t cost you any more than if you had paid cash upfront. That can mean hundreds or thousands saved in interest.
Thebest0 percent APR credit cards come with perks that increase the value of the card even more. For example, some travel rewards cards let you rack up sign-up bonuses and perks while saving money on interest, and there are even some cash-back cards with 0 percent APR offers. That means you could earn money on your purchase while saving on interest.
These 0 percent APR credit card offers can be complex, though, so we’re breaking down everything you need to know about them. That includes the pros and cons of card use as well as tips for maximizing your benefit with these types of cards.
The Pros and Cons of 0 Percent APR Credit Cards
We love a good 0 percent APR credit card offer, and if you manage your account well and know how to put it to use, there really aren’t many downsides. Since a tiny misunderstanding or mistake when using these cards can erase some of the benefits, though, we’re listing out the major pros and cons and providing some tips on how you can avoid the latter.
Benefits of 0 Percent APR Credit Cards
One of the biggest benefits of these cards is that you can finance a large purchase with no interest. What does that mean for you? A lot of potential savings.
Let’s look at a hypothetical situation so you can see how much savings we’re talking about.
Perhaps you have a new credit card with an introductory 0 percent APR for 21 months on purchases you make within the first four months. Whatever you buy within the first four months, you don’t pay interest as long as you pay the related balances off within the first 21 months you own the card.
Perhaps you decide to renovate your outdoor patio, and the total cost of that is $5,000, which you put on the card the first month. That leaves you 20 months to pay off the balance, which equates to a $250 payment each month.
The total cost of your patio reno? $5,000.
Now, let’s imagine a different scenario. You don’t have a 0 percent APR credit card, but you do have a credit card with an interest rate of 15 percent. You use that card to fund your outdoor patio reno, but you can still only afford to make payments of $250 on it. Because of the 15 percent APR, you’re going to pay $729.19extrafor that patio reno. Plus, you’ll pay on the balance for an extra four months.
But saving on interest isn’t the only possible benefit of a 0 percent APR credit card.
- You can use these cards to build a strong credit history without the cost associated with traditional borrowing. Carrying a balance on your card that you pay off over time can bump your credit score (as long as you do pay it off, don’t miss payments, and don’t carry too high a debt-to-income ratio). But carrying a balance on a regular card means you pay interest on the balance, so a 0percent card is a less expensive way to build a credit history.
- Some 0 percent APR cards come with a cash-back perk. Cash-back cards typically reward you between 1 and 3 percent cash back on qualifying purchases. In the patio example above, if the 0 percent APR card awarded 1 percent cash back on purchases, you’d earn $50 cash backin additionto saving all that money in interest.
Potential Disadvantages of 0 Percent APR Credit Cards
The biggest potential disadvantage of a 0 percent APR credit card is thatit can be easy to make a small mistake and lose the benefits defined above.
For example, if you miss any monthly payment (including being just a little late on making the payment), you’ll likely trigger the end of the 0 percent APR period. That means interest will begin accruing with your next statement, and you could wind up paying hundreds or thousands in interest on your purchases.
Seek tip: This disadvantage is easy to mitigate by making at least the monthly minimum payment on time every month. If you’re not the most organized manager of personal finances, we recommend looking for cards that offer text and mobile payment reminders and account management options. That makes it less likely you’ll miss a payment because life got busy.
Another important detail of 0 percent APR credit card offers is what the offer actually covers. Some cards offer 0 percent APR on purchases. Others offer it on balance transfers, and still, others provide this perk for both types of transactions.
Before you make any moves with your card (or even apply) read all the fine print. Here are the details you’re looking for.
- What is the introductory APR period? This is how long you have to pay off any relevant balance before interest begins to accrue
- When does the introductory period begin? Many begin as soon as you open the card; others may start the clock when you make a relevant purchase, providing you a bit more time to pay off the balance.
- What types of transactions are covered? Options are usually balanced transfers and purchases. These types of cards rarely offer 0 percent APR on cash advances or cash-type purchases such as money orders.
- Is there a time limit on purchases or balance transfers? Most 0 percent APR cards put a limit on how long you can take advantage of this perk. For example, balance transfersmust typically be made within a few months of opening the card for the 0 percent APR to kick in. Purchases may also need to be made in the first few months, but definitely within the 0 percent APR introductory time frame.
0 Percent APR Cards Versus Balance Transfer Rewards Cards
A 0 percent APR card is any card that allows you to make a transaction without paying interest for a certain period of time.
That’s in contrast to a balance transfer rewards card, which offers a low introductory APR on balance transfers only and may also come with other rewards perks such as airline miles or hotel points.
The biggest difference between these two similar types of cards is that a balance transfer-only card doesn’t let you finance a big purchase over time without paying interest on it. Instead, it lets you transfer a balance from a high-interest credit card to save money if you need time to pay down your balance.
A 0 percent APRpurchasecard is a great way to finance something or build credit.
A 0 percent APRbalance transfercard is a great way to snowball down your debt faster or get out of a high-interest debt situation.
How to Choose the Right 0 Percent APR Credit Card
Choosing the right 0 percent APR credit card means matching the available offers to your financial and personal needs.
First, decide whether you’re going to use the 0 percent APR card to finance a large purchase. If so, you’ll need a card with:
- A high enough purchasing and credit limit to cover the relevant costs
- A long enough introductory offer that you can make affordable payments each month but still pay the purchase off before interest begins accruing
- Excellent customer service options, so you have someone to contact if you have questions or problems
Seek tip: Credit card companies and banks compete constantly with each other, so you’re likely to find several offers that work with your basic APR and purchasing needs. Don’t overlook sign-up bonuses and other perks, which could add even more value to your account.
Best Sign-Up Bonus Credit Cards That Are Also 0 Percent APR Credit Cards
Some rewards credit cards include 0 percent APR offers for purchases. That means you can make your purchase, pay it off over time without accruing interest and build points to cover travel.
Plus, your big purchase is a great way to score huge sign-up bonuses that can lead to big wins during your first year of card membership.
For example, a card might offer a 12-month 0 percent APR on purchases and a sign-up bonus of 50,000 miles if you spend $5,000 within the first three months.
That patio reno example above then turns into:
- 12 interest-free payments of about $417 a month
- 50,000 points that could be worth as much as $750 on average in travel rewards such as free flights or hotel stays
The best sign-up bonus cards that are also 0 percent APR cards are those that let you stack both benefits, leveraging interest-free financing while racking up rewards.
Check the Fine Print for Added Benefits and Value
Plus, you can find so much added value in the fine print on these types of credit cards.
Travel credit cards offer all kinds of perks that can add up to hundreds in value each year, and many credit card companies offer hidden perks on almost all their cards. Some options to look for in the fine print on your offer include:
- Extended warranty opportunities. Many credit card companies extend the manufacturer’s warranties on items by up to a year if you make the purchase with your card. That means you might purchase a home audio/video piece with a two-year manufacturer’s warranty; if you pay for it with the right card, and it stops working at the 2.5-year mark, you’re still covered.
- Rental car insurance waivers. We think any travel rewards credit card worth using should have this perk. It works like this: if you pay for your total car rental with your credit card, then you can waive the insurance from the rental company. The credit card company offers insurance automatically in these situations, and that can save you a nice chunk of change, especially if you travel regularly.
- Baggage delay or loss insurance. Cards with these perks will reimburse you for lost baggage or for the inconvenience of having your bags delayed when traveling. Check the fine print on your offer to find out what the limits are for each type of policy and how you can report a claim when necessary.
- Cell phone coverage. Many card companies offer cell phone insurance if you purchase your device with your credit card. Typically, a deductible of around $50 to $100 a claim comes into play, but smartphones run $700 or more, so this perk could save you $600 plus if your phone is damaged or stolen.
These are just some of the valuable benefits offered by credit card companies. When you’re perusing, it might help to make a list of the benefits offered by each card before making a decision (or you can check out our reviews and tables, which detail the benefits and value of top cards available in every category).
What the Banks Don’t Tell You About 0 Percent APR Cards
Finally, before you opt-in on a 0 percent APR credit card, it’s helpful to know a few things the banks don’t always rush to discuss.
- You can open another cardat the end of your 0 percent APR period. That means you could conceivably move your balance off of the existing card and to another card with 0 percent balance transfer offer to keep making payments overtime without accruing interest.
- You can apply for multiple cards from multiple banks. It’s best practice to avoid applying to numerous cards with the same bank within a short time period; some banks will even automatically deny your application if you do so. But youcanspread your applications out over different banks to ensure you get an offer that works best for you or to put 0 percent APR benefits to work overtime in your wallet.
- Not all 0 percent APR offers are the same. In some cases, the APR is only delayed. That means that you will paybackinterest on any balance left after the period is over – and that can be expensive. We recommend sticking with true 0 percent APR offers, where interest is calculated going forward should any balance remain after the introductory period is over.
We love 0 percent APRcards because they let you finance large purchases without any added expense. But you do have to use them intelligently and be aware of all the fine print to get the biggest advantage.