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Low Interest and 0% Intro APR

What happens when your 0% introductory APR ends?

Many credit cards allow you to carry a balance with no interest for several months. Here’s what to do if you don’t pay it off in that time

Summary

Credit cards with 0% introductory APRs can save you a bundle on interest expense. Time flies during that introductory period, however. Before you know it, the zero-interest party is over, and you’re paying high credit card interest again. Here’s what you should know.

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Credit cards with 0% introductory periods are popular – with good reason.

They can save you a bundle on interest expense. Time flies during that introductory period, however. Before you know it, the zero-interest party is over, and you’re paying high credit card interest again.

Here’s what to know about 0% introductory APR credit cards.

How 0% introductory APR credit cards work

When you get a 0% introductory rate credit card, you have a certain amount of time, as specified in your contract, during which you don’t pay interest on the balance you carry from month to month. That period often ranges from 12 to 21 months.

If you have a balance at the end of the period, you start paying interest as of the ending date of the introductory period.

See related: How do credit card APRs work?

How can you make the most of your introductory period?

A zero-interest introductory period can be a great motivator to pay the debt off before the period ends. The hard part is staying motivated until you reach your goal.

J.R. Duren, senior editor at HighYa.com, says it helps to give your introductory rate credit card a purpose.

“If you don’t, there’s a good chance you spend on the card just to spend,” he says. “Make the offer part of your financial plan.”

Here are some examples of using introductory rate credit cards wisely:

  • To pay unexpected expenses. Say you can’t afford to pay a car repair bill with cash, but you could afford payments. “Charge the repair to a 0% card,” says Duren. “Your income each month will cover the reasonable monthly payments and you won’t rack up interest.”
  • To get cash back or rewards. If you owe a bill anyway, you may choose to earn cash back or rewards. For example, according to Duren, a hospital can put you on a long-term, interest-free payment plan. But he noted that using a 0% APR rewards card like the Chase Freedom Unlimited (regular variable APR of 16.49% to 25.24%) or the Capital One® Quicksilver® Cash Rewards Credit Card (regular variable APR of 15.49% to 25.49%) can allow you to spread the payments over 15 months while earning rewards that you can put toward the bill.
  • To pay off debt faster. An existing high-interest credit card could cost you hundreds of dollars per month in interest charges. You could transfer the balance to a zero-interest credit card and apply your entire payments to reducing the balance during the promotional period. “Though it will cost you a 3% to 5% balance transfer fee (in most cases), the thousands you save in interest during the 0% period is well worth the fee,” says Duren.

What can go wrong using 0% introductory rate credit cards?

Watch out for these potential pitfalls.

  • Using multiple introductory rate cards. “In my experience, the majority of people who take advantage of 0% offers are often those who have amassed too much credit card debt to begin with,” says Marc Lowlicht, CEO of Opes Private Wealth Management in East Hampton, New York. “If the cardholder is not disciplined, they’ll get caught in the trap of going from one zero rate card to another while racking up charges, rather than zeroing out the balance before the introductory period is up.”
  • Not understanding balance charge fees. “A lot of people, when they get the offer for the 0% interest card, they need to be aware of the enticement of transferring the balances from other cards,” says Deborah McNaughton, credit expert and owner of Professional Credit Counselors, Inc. Banks typically charge 3%-5% in balance transfer fees, though there are some cards that offer transfers with no fee.
  • Increased debt. A new credit card can be an invitation to spend – especially if it offers rewards. “If the mentality is that I’m going to charge up this card and get points, you can lose track of how much you’re actually spending,” says McNaughton. “Look at your financial situation so you don’t keep adding debt to the credit card balance.”
  • Some people feel less motivated to pay off debt during the no-interest period, setting themselves up for paying high interest rates after the period ends. “There’s nothing free,” says McNaughton. “I get calls from people who have these 0% rates, and they also have other credit card debt. They say, ‘I don’t want to pay this card off because I’m not paying interest.’ You still have to pay it off.”

See related: ‘Upgrading’ to a no-fee credit card

What should you do when your 0% APR period ends and you owe a balance?

If your introductory period is ending, and despite your best efforts you still owe a balance, consider these steps:

  • Keep an eye on your minimum payments. “If you have set up an automatic bill pay to cover your monthly payment during the 0% period, remember that your monthly payment will go up when the interest kicks in,” says Duren. “Your previous payments won’t cover the new payment plus interest.” Make sure your automatic payments cover the new minimum amount, and that you have enough money in your checking account to cover it.
  • Find other ways to pay off your debt. The higher your interest rate, the more important it is that you find another way to finance your debt until you can pay it off. Consider taking money from savings, selling something or getting a low-interest personal loan or home equity line of credit, for example.
  • Keep paying, but faster. Even high interest rates won’t hurt much if you pay off the debt quickly. Now that interest is accruing, you may be motivated to work extra hours or slash your budget temporarily to finish it off.
  • Get another 0% APR card. Another card, and another introductory period, can provide extra time. Be aware it’s not a permanent solution, and that you generally pay a 3% to 5% fee for a balance transfer.

See related: How long does a balance transfer take?

0% introductory APR credit card options

Look for an introductory period long enough for your debt payoff strategy. Consider cards with no annual fee, or with rewards and points that more than offset the cost of any fee. Here are a few options:

  • The Capital One Quicksilver Cash Rewards Credit Card not only gives you a 15-month 0% introductory period (regular variable APR of 15.49% to 25.49%), but it also lets you earn a $150 bonus after you spend $500 in your first three months from account opening. You earn unlimited 1.5% cash back on all purchases, and your cash back rewards never expire while your account remains open. It has no annual fee or foreign transaction fees.
  • The Chase Freedom Unlimited also has a 15-month 0% introductory period (regular variable APR of 16.49% to 25.24%), and it offers a $150 bonus after you spend $500 in your first three months from account opening. You earn unlimited 1.5% cash back on all purchases. It has no annual fee.
  • For a longer introductory period on balance transfers, the Citi® Diamond Preferred® Card has a 18-month introductory period, subject to a 3% ($5 minimum) balance transfer fee. The introductory period for purchases is also 18 months from the date of account opening. This account has no annual fee, and interest rates after the introductory period range from 14.74% to 24.74% variable.

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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Credit Card Rate Report Updated: July 8th, 2020
Business
13.91%
Airline
15.48%
Cash Back
16.09%
Reward
15.82%
Student
16.12%

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