4 Ways To Use 0% APR Offers Wisely
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Written by
Karen Doyle
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Edited by
Levi Leidy
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Reviewed by
Jasmin Baron
If you’ve racked up credit card debt, you may be looking at credit cards that offer an introductory 0% annual percentage rate (APR) on balance transfers to focus on paying down what you owe. Or, you might have upcoming large purchases that you want to pay off over time without incurring interest.
Not all 0% APR offers are created equal, so choosing the best low-APR credit card for your needs takes careful consideration.
Here’s what you need to know about ways to use 0% APR offers wisely.
Know Why You Want a 0% APR Offer
What’s the purpose of getting a card that offers 0% APR? Your needs will dictate the right card for you.
One common reason to consider a 0% APR credit card is to pay off high-interest-rate balances on other cards. The best balance transfer credit cards offer interest-free periods of up to 24 months, which can give you the breathing room you need to tackle your debt.
But even if you don’t have existing debt, a 0% APR card can be useful for paying off major purchases over several months without interest.
Understand the Terms
It’s important to choose a 0% APR offer that aligns with your financial goals. Here are some of the factors you’ll want to compare.
Introductory period: The length of time you won’t pay interest on a 0% APR card typically ranges from 12 to 24 months. Consider your financial resources when deciding how long a time frame you’ll need to pay off your balances before the interest-free period ends.
Balance transfers versus purchases: Some cards offer a 0% intro APR on purchases, balance transfers or both. There may be a difference between the amount of time you’ll pay no interest on purchases versus balance transfers.
Rewards: Cards with the longest interest-free offers typically don’t earn rewards. But if you’re willing to accept a shorter intro period, some cards earn cash back, points or miles on purchases. For example, cash-back credit cards may offer a flat rate of cash back on everything, while others will offer higher rewards in certain categories, such as gas or dining out. Keep in mind that you won’t earn cash back on balance transfers.
Payment terms: Even though interest is paused for the introductory period, you’ll still be responsible for making at least the minimum payment on your card each month. Failure to do so or paying late can result in you losing your 0% rate and may come with other penalties.
Fees: Most 0% APR credit cards have no annual fee. If there’s a fee, be sure the credit card’s perks outweigh the yearly cost. In addition, you’ll pay a balance transfer fee (usually 3% to 5% of the amount transferred) with most balance transfer credit cards.
Regular APR: Have a plan to pay off your balance before the introductory period expires, because after that, the card’s regular APR kicks in. This is especially important with balance transfers, because the credit card interest rate for those can be even higher than for purchases.
Pay Off Other Cards With a Balance Transfer
By transferring a balance from a card charging 25% APR or more to one that charges zero interest, you can pay off your debt much faster. Note that you typically can’t transfer a balance to a card issued by the same bank.
There is one huge caveat to this plan, however. Once you transfer the balances, avoid using those cards again — at least not for anything that can’t be paid off in full each month. If you transfer your balances and then rack them up again, you’ve defeated the purpose of getting a 0% APR card in the first place.
It’s important to pay off your balances before the introductory period ends. Any amounts owed on your new card at the end of that time will be subject to the regular APR.
Here’s the easy way to do this. Take the amount of money you’re going to transfer to your new 0% APR card and divide it by the number of months in the introductory period. That will tell you how much you need to pay each month to ensure your balance is paid off by the time the card starts charging interest.
For example, suppose you have a balance of $9,000 on a high-interest-rate credit card. You get a new card that offers 0% APR for 18 months. If you pay $500 per month on your new card, your entire balance will be paid off by the time the card starts charging interest.
Use a 0% APR Credit Card for Large Purchases
If you have a large purchase coming up that you don’t think you’ll be able to pay off in one month, using a 0% APR card is a good way to spread out payments. As long as you make your minimum payment each month and pay off the balance before the introductory period ends, you won’t pay any interest on your purchase.
A similar warning applies here, as with balance transfers. If you don’t pay off the entire purchase, or if you continue to use the card to the point where you can’t pay the balance each month, you’ll be paying interest on your purchases after the introductory period ends.
Zero percent APR credit cards are a useful tool for managing debt, but only when used responsibly. Knowing how to use these cards wisely will ensure you benefit from these introductory rates and avoid paying interest when they expire.
