A 0% intro APR credit card may be your best bet for a short-term no-interest loan, as long as you read the fine print.
If you’re in the market for a 0% credit card, you probably plan to carry a balance on that card for a while. Maybe you have debt to pay off with a balance transfer or a big purchase coming up.
A 0% APR credit card may be your best bet for a short-term no-interest loan, as long as you read the fine print and plan carefully. Here are a few things to consider.
What is a 0% APR credit card?
A credit card with a 0% APR lets a new cardholder avoid paying interest on charges or balance transfers during an introductory period that typically lasts six to 18 months. When the 0% intro period ends, the regular APR kicks in. So, if a balance remains after the 0% period expires, you’ll end up paying interest at the regular rate.
A card with a 0% introductory APR can come in especially handy if you don’t have enough cash to cover a big purchase, such as a new refrigerator. You can pay off the purchase during the intro period, and steer clear of paying interest. Or maybe you owe $5,000 on a high-interest card. Transfer that balance to a 0% card and you can save yourself serious cash while you pay it off.
To qualify for a 0% card, you typically need a good or excellent credit score. Possible ranges for those scores are:
- FICO score: 670-850
- VantageScore: 661-850
Consider your 0% card options
A number of card issuers extend 0% APR offers to new cardholders, but not all are created equal. For example, some cards provide generous introductory periods, while others provide healthy bonuses. As you’re reviewing your options, consider:
- Citi Custom Cash℠ Card, for instance, offers a 15-month 0% APR period for purchases and balance transfers (then a variable APR of 13.99% to 23.99%). The Discover it® Balance Transfer card provides only six months of 0% APR on purchases but 18 months on balance transfers (then a variable APR of 11.99% to 22.99%). Length of introductory period. Some cards are better for balance transfers than purchases. The
- Introductory bonus. Some card issuers offer sign-up bonuses for 0% APR cards, which can help knock down the balance on a big purchase. For example, the Bank of America® Customized Cash Rewards credit card awards a $200 cash rewards bonus after you make at least $1,000 in purchases within 90 days of the account being opened. It also has an introductory 0% APR for purchases for the first 15 billing cycles and the same time period for balance transfers made within the first 60 days (then a variable APR of 13.99% to 23.99%). By contrast, the Citi Simplicity® Card offers an 21-month 0% introductory APR period on balance transfers completed within the first four months and a 12-month 0% introductory APR offer on purchases (then a variable APR of 14.74% to 24.74%), but no introductory bonus.
- Fees. Fees can wipe out interest savings if you’re not careful, so take them into account. The Wells Fargo Active Cash℠ card offers a 0% introductory APR for 15 months from account opening on purchases and on qualifying balance transfers made within the first 120 days (then a variable APR of 14.99% to 24.99%) and charges no annual fee. However, it imposes fees on balance transfers, cash advances, foreign transactions, late payments and returned checks or payments. By contrast, the Citi Simplicity card has an 21-month 0% intro APR on balance transfers completed within the first four months and no annual fee or late fees, but comes with foreign transaction, cash advance and balance transfer fees. A 2020 survey by CreditCards.com found the most common credit card fees are late payment fees and cash advance fees.
- Rewards. Some cards with a 0% APR period reward you in other ways as well – especially if you’re paying down a purchase. For example, the Blue Cash Everyday® Card from American Express offers 0% APR for 15 months on purchases only (then a variable APR of 13.99% to 23.99%). While paying that off, you can earn a $200 statement credit after spending $2,000 in purchases on your new card within the first six months, 3% cash back at U.S. supermarkets (up to $6,000 per year in purchases, then 1%), 2% at U.S. gas stations and select U.S. department stores and 1% on other purchases.
- Regular APR. A 0% APR offer is enticing, but that 0% rate eventually expires. The rate you end up paying will be calculated according to your creditworthiness.
Figure out how much time you need to pay off the balance
Sure, a 0% APR card frees you from paying interest – but only during the 0% APR period.
In light of that, it’s wise to figure out how long you’ve got to pay off the balance on your 0% APR card before the regular APR hits and interest starts piling up. Fortunately, the math is pretty simple. To get a rough idea of how much you’ll need to pay each month to wipe out your balance before the 0% period ends and the regular APR takes effect, divide the balance of your 0% card by the number of months for the intro period.
Let’s say the 0% APR period lasts 12 months and you buy a $2,400 refrigerator right after opening your account. You have 12 months to erase the $2,400 balance before the card issuer starts charging interest. During that period, each monthly payment would need to be at least $200 to escape the regular APR. Similarly, if you have 18 months to pay off a $5,000 balance transfer, you can do it with $280 per month. Remember that this formula works only if you make no other purchases or balance transfers during the same 12-month intro period.
Consider the cards’ other benefits
A 0% APR for purchases, balance transfers or both ranks right up there among the best benefits of a credit card. But you might not want to pick a card based solely on the 0% APR, particularly since that offer will vanish at some point. It’s best to also look at a card’s other benefits.
Here are some examples:
- With the Citi® Diamond Preferred® card, you gain special access to tickets for events like concerts and dining experiences through the Citi Entertainment® program.
- During the first year you have it, the Discover it® Cash Back card automatically matches all of the cash back you’ve earned.
- The U.S. Bank Visa® Platinum card gives you up to $600 worth of protection for your cellphone (subject to a $25 deductible) against covered damage or theft when you pay your monthly bill with this card.
- The Chase Freedom Unlimited card lets you earn 5% cash back on travel purchased through Chase Ultimate Rewards, 3% at restaurants and drugstores and 1.5% on all other purchases.
Figure out what to do when the 0% period ends
That 0% APR period will end in a matter of months, normally six to 18. If you know you can pay off the full balance before the 0% rate expires, you have less to worry about. Here’s what you might do if a balance remains when the APR switches from 0% to regular:
- Pay off the balance as soon as possible. Once the 0% expires, you’ll pay the regular APR for as long as you carry a balance.
- Ask for a lower rate. If you’ve got a positive history with your account, the card issuer may be willing to grant your request for a reduced APR.
- Look into a balance transfer. You might be able to offload the balance from the card with the expired 0% rate to another card with a 0% intro rate.
- Consider a debt consolidation loan. A debt consolidation loan may enable you to tackle the leftover balance at an APR that’s lower than the regular APR for the credit card. Keep in mind, though, that if the payoff period for the loan lasts a while, you could wind up paying more interest overall than if you’d simply stuck with the credit card.
A credit card with a 0% introductory APR can be a valuable tool in your credit toolbox. Choose a card that suits your needs, whether that’s paying off a balance transfer or a major purchase interest-free. Read the terms and conditions carefully and have a plan in place to pay it off within the card’s introductory 0% APR period, so you avoid unnecessary fees and interest charges.