Credit cards with a 0% APR can be a great way to save, and we make it easy to compare the latest offers, including introductory offers up to 21 months long. 0% intro APRs on purchases can be great if you're planning a big ticket purchase, like a home remodel or a honeymoon. A low rate balance transfer card can be a great way to consolidate balances. Check out the 0% credit cards from our partners, pick the one that's right for you and apply online.
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at Capital One's
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Updated: May 22, 2017
|Card||0% Purchase APR Period||Annual Fee||Regular APR|
|Capital One® VentureOne® Rewards Credit Card||12 months||$0||12.74% - 22.74% Variable|
|Discover it® Cashback Match™||14 months||$0||11.74% - 23.74% Variable|
|Barclaycard Ring™ Mastercard®||15 months||$0||13.74% Variable|
|Wells Fargo Cash Wise Visa® Card||12 months||$0||13.74% - 25.74% Variable|
|Citi® Diamond Preferred® Card||21 months||$0||13.24% - 23.24% Variable|
|Chase Freedom UnlimitedSM||15 months||$0||15.74% - 24.49% Variable|
|Citi Simplicity® Card||21 months||$0||14.24% - 24.24% Variable|
While 0% introductory offers are a great way to get out from under crushing debt, they can be a great way to get deeper into a hole, as well.
With a 0% offer, you can pay off debt interest-free for up to 21 months, depending on the card, saving you hundreds of dollars in interest fees. But it's important to have a plan for how you're going to pay off the charges. How much can you pay down each month? Will you be able to pay off the charges before the offer ends? Otherwise, you'll just pay interest fees on the charges once the offer ends.
The trick is to understand the rules of the game before committing to this kind of card. From balance transfer fees to go-to rates, we'll tell you how to choose a 0% intro interest card, pitfalls to avoid and how to use it going forward.
Some credit cards have 0% introductory APR offers. What does that mean? Simply that you pay no interest on a card balance for a set amount of time, up to 21 months. This is handy when you've incurred debt and you can't get out from under the interest fees or you have a big purchase coming up.
There are basically two types of offers, sometimes in a single card:
The term “0% intro APR” means that you can pay interest–free for a set amount of time on balance transfers and/or purchases. The offer's length of time varies by card and can be as little as 6 months and as long as 21 months. For example, the Discover it offers an intro 0% APR on purchases for 6 months and a 0% APR on balance transfers for 18 months, while the Citi Diamond Preferred offers a 0% intro APR on both purchases and balance transfers for 21 months.
Heads up that there is usually a balance transfer fee, and if you are late paying, the card issuer might kick in the go–to APR. But if you pay on time and map out paying the debt before the offer ends, you can save hundreds of dollars.
When it's time to choose a 0% APR offer, a number of issues come into play, including length of the offer and balance transfer fees. Here's what you need to know:
A go–to APR is the rate that kicks in once the 0% intro APR offer ends. So, if the card you've chosen offers an 18–month 0% intro APR, you have 18 months to pay for the balance, then the go–to rate kicks in. Your credit rating and your history of payments help decide what your rate will be. The better your payment history and the higher your credit rating, the lower the go–to rate.
The average interest rate on credit cards varies based in part on the Federal Reserve's monthly decision on interest rates. Currently, the national average for credit cards is about 15.75%, but that can vary based on type of card. Low interest cards, of course, have the lowest average, at under 13%. Business and student cards are also low, both under 14%. The highest are instant approval, at just over 18% and bad credit, at over 23%.
That said, you should not be too concerned about a card's interest rate, because it's best to pay your card bill in full each month. It's better for your credit because FICO, the dominant credit scoring model, tracks your credit utilization ratio, which is the amount of available credit you have compared to the balance that you owe. The lower the balance, the lower your ratio, which FICO loves.
Rather than choose a credit card because it has a “good” interest rate, look at the card's features, because credit cards are not meant to be long–term loans.
The national average for credit card interest rates is about 15.75%. Depending on the type of card, the interest rate will vary, with low interest cards at the bottom and bad credit cards at the top. But that shouldn't concern you too much.
Instead, look at the 0% intro rate for balance transfers and purchases when choosing a card. Then, make sure you can pay off the debt before the go–to rate kicks in. If you know you're going to go past the intro rate period, then make sure you pay on time to improve your credit rating, because your credit rating and your on–time payments are two factors for what your go–to rate will be.
The APR on a credit card is determined by a number of factors, including the Federal Reserve's current rate, your credit rating, the type of card you choose, and whether you have been paying on time.
The national average go–to interest rate for credit cards is about 15.75% — that's higher or lower depending on the type of card, with low interest and student cards at the bottom and bad credit cards at the top.
When the Federal Reserve increases its benchmark for rates, you'll typically see credit cards' rates inch up.
Your credit rating and whether you pay on time also factor into your rate; credit cards can have a range from which they assign your go–to rate.
Watch out, because you can drive your APR up by paying late or going over the limit. That can also land you with fines and even loss of the card.
The easiest way to calculate interest on a credit card is with our handy–dandy calculators. You can figure out how much interest you'll owe if you pay the minimum; look at how much you need to pay on a balance transfer each month to avoid interest rates; or see how long it will take you to pay off your debt.
That said, it helps to understand how credit card issuers calculate interest. According to Discover, just divide your APR (say it's 15%) by 365 days, or .041096%. So, if you have a balance of $1,000, the daily interest rate is $0.41, which accrues each day. At the end of the month, you owe $1,013.
That may not seem like much, but it can add up quickly. If you pay the minimum on $1,000 each month (15% APR), it will take you 54 months and you will pay $370.46 in interest. Better to just pay in full each month and not put anything on your card you can't afford to buy with cash.
It's easy to avoid paying interest on a credit card – just pay in full each month before the due date. Remember, credit cards aren't meant to be long–term lenders. They should be for building credit and convenience. You don't want to use a card for an emergency when you don't have the cash nearby, because the interest fees can overwhelm you. Instead, build an emergency fund that you can tap when the unexpected occurs, such as a broken–down car or a medical bill.
In fact, it can actually be a good idea to pay more than once a month. Just to be safe, if you pay in full several times a month, you can potentially improve your credit even more, because you don't know when issuers report to credit bureaus – pay several times a month and increase the chance of having a low balance when issuers report. (FICO, the dominant credit scoring model, bases your rating on what the credit bureaus gather about your finances.)
Here's how it works: FICO compares how much available credit you have to how much of a balance you have. The lower the ratio the better. So, if you have $10,000 available credit and you owe $1,000, your credit utilization ratio is only 10%. Owe $3,000? The ratio jumps to 30%. If you pay several times a month, you increase the chance of lowering your ratio, which is a critical part of your score.
There are myriad ways to use a 0% APR credit card. From making a big purchase, such as an appliance or grill, to using it to pay down an existing balance, 0% APR cards can simplify your life. There are some things you need to know, though:
The best way to use a 0% introductory period offer is to calculate how much you can pay each month for how long. So, if you make a $3,600 purchase, and can pay $300 a month, a 12–month offer is enough for you. If you plan to use the card for a balance transfer, keep in mind that you will probably have a balance transfer fee of 3%–5%. That means you will owe $108–$180 right out of the gate. But that can be worth your while if the interest you would pay otherwise is higher than the fees.
Any credit card (including a 0% APR card) that is used wisely is a good way to build credit. With a new card, you are increasing your available credit, which can be helpful for your FICO rating. Also, each month that you pay on time, your credit rating gets a little kick. And if you are diligent about paying down your debt, that will also improve your credit as the balance goes down, provided you don't incur additional debt.
That said, taking out a credit card is only good for your credit if you are responsible with it. It is the fastest way to build credit, no matter the type of card, but it can be a disaster if you let charges pile up or if you don't pay on time each month. Before committing to a new card, make sure you will use it correctly.
Paying off student loans with a 0% APR credit card can be tricky. First, you might owe more than you can pay off in the maximum offer of 21 months, which means you would probably be strapped with higher interest rates than you were paying on the student loan.
Also, you will probably have a charge of 3%–5% on the total, which is another expense you may not have expected.
Finally, it is actually worth your while to hang on to the student loan, because it's an installment loan. FICO, the dominant scoring model, likes a mix of credit types, and if you have a credit card and an installment loan, that can give your credit score a little boost, provided you're paying on time.
It's rare when you should cancel your 0% interest card once you pay off the balance. That's because keeping it on hand is a great way build your credit. Here's why:
Let's say you paid off $3,000 within the 15 months your 0% intro interest offer lasted. Awesome, right? Now, you're so sick of credit cards, you want to cancel the card and go all cash. But not so fast.
Here's the deal: The fastest way to build credit is to have a credit card and to pay in full and on time each month. FICO, the dominant scoring model, loves it when you do that, and you will be rewarded within months of your good habits.
Still hate credit cards and want to pay in cash? There's a way to have the best of both worlds. Keep your card account active by putting a charge on it each month that you would make any way, such as your gym membership, then pay it off before the due date. Then, use cash envelopes or whatever system you prefer to stay within budget.
Whatever you do, don't put the card in your sock drawer, because it's only a matter of time before the issuer cancels the card because it's inactive.
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