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.
The Bank of America content was last updated on August 22, 2022.
A credit card with a 0% APR enables a new cardholder to avoid paying interest on charges or balance transfers during an introductory period that typically lasts six to 18 months – and sometimes even longer. 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. You can transfer that balance to a 0% card and can save yourself some serious cash while you pay it off.
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 keep in mind if you decide to go this route:
Consider your 0% card options
Many 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:
- Length of introductory period: Some cards are better for balance transfers than purchases. The Citi Custom Cash℠ Card, for instance, offers a 15-month 0% intro APR period for purchases and balance transfers (then a variable APR of 16.24% to 26.24%). The Discover it® Balance Transfer card provides only six months of 0% intro APR on purchases but 18 months on balance transfers (then a variable APR of 14.24% to 25.24%).
- 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 offers cardholders a $200 cash rewards bonus after they spend at least $1,000 within 90 days. It also has an introductory 0% APR for purchases for the first 18 billing cycles and the same time period for balance transfers made within the first 60 days (then a variable APR of 16.24% to 26.24%). By contrast, the Citi Simplicity® Card offers a 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 16.99% to 26.99%), 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 17.24%, 22.24% or 27.24%) and charges no annual fee. However, it does impose fees on balance transfers, cash advances, foreign transactions, late payments and returned checks or payments.
- Rewards: Some cards with 0% APR periods 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% intro APR for 15 months on purchases and balance transfers (then a variable APR of 16.24% to 27.24%). While paying that off, you can earn a $200 statement credit after spending $2,000 in the first six months, plus you’ll get 3% cash back at U.S. supermarkets, U.S. gas stations and on U.S. online retail purchases (up to $6,000 per year in purchases in each category, then 1%), 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 pay off 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 credit cards’ best benefits. 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 perks.
Here are some examples:
- The Citi® Diamond Preferred® Card, gives you special access to tickets for events like concerts and dining experiences through the Citi Entertainment® program.
- The Discover it® Cash Back card automatically matches all of the cash back you’ve earned during your first year of card ownership.
- 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 it.
- 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. 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 item 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, however, 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.