Should You Apply for an Intro 0% APR Credit Card?
What does intro 0% APR mean?
APR stands for annual percentage rate, and it refers to the interest rate that your credit card charges you. Credit cards offering introductory zero percent APR don’t charge interest for a specific time period on purchases or balance transfers, usually six months to a year. That could mean big savings on interest if you plan to carry a balance during the introductory period, or transfer a balance from another card.
How an intro zero percent APR credit card works
While an intro 0% APR stands for annual to percentage rate, it doesn’t always mean you’ll get that rate for a whole year. If your introductory period is six months and has zero percent financing for purchases, that means you’ll pay no interest on purchases during the six months of the intro period, but after that the APR will change to the regular rate. Your monthly credit card interest is calculated by dividing the APR by 12 to get your monthly interest rate.
What to look for in an introductory 0% APR credit card offer
When you’re comparing introductory zero percent APR credit card balance transfer intro offers, it’s important to look at the length of the introductory period and the standard APR just in case you aren’t able to pay off your transferred debt before the promotional rate expires.
Make sure you understand what the APR is as well as any other features like a rewards program. Also, make sure to take into account any balance transfer fees, which can range from 2 % to 5 % of the transfer amount. By taking the time to research your options, you’ll find the introductory promotional period offer that’s right for you. Some cards also offer a zero percent intro APR on purchases, and these allow you to pay off new purchases over time, without any extra fees.
What to avoid when looking at intro zero percent APR credit cards
While an introductory 0% APR promotional period can save you money, it also has some drawbacks that could end up costing you. Here are some common mistakes to avoid with introductory zero percent APR credit cards:
- Assuming the intro 0% APR will last forever: It won’t, because it’s always an introductory rate. Once the introductory promotional period expires, the interest rate defaults to the card’s regular APR, which can range anywhere from 15.99% to more than 25.99%, in some instances. In addition, the card may have a variable APR, which means the interest rate may be higher or lower over time.
- Not paying off the balance in full before the zero percent introductory APR expires: Most people take advantage of an introductory 0% APR promotional period offers to save money, typically by transferring a balance from a higher-interest card, or making a big-ticket or emergency purchase that they plan to pay off over time. That’s because you may have a deferred interest payment, which means the interest charges are delayed until the introductory period expires. If you don’t pay off the balance by the end of the promotional period, however, it will start to accrue interest. Before transferring a balance to an introductory zero percent APR card or making a large purchase, consider planning how much you’ll need to pay each month to get the balance to $0 by the time the 0% intro APR period ends.
- Making new purchases after you’ve transferred a balance: When you take advantage of an introductory 0% APR balance transfer offer, you can usually carry the balance month-to-month while taking advantage of deferred interest charges. If you make purchases with the card, however, you’ll be charged interest because the zero percent APR grace period doesn’t apply if you don’t pay off the new balance in full. The exception is if you have a card with an introductory 0% APR promotional period that applies to both balance transfers and regular purchases. In that instance, you won’t accrue interest on the old balance and any new purchases until the 0% introductory APR expires. Whenever possible, though, you want to avoid taking on new debt when you’re trying to pay off existing debt. Getting a card with no annual fee can help. While you may end up paying interest charges on an outstanding balance if you don’t pay off the card in full every month, you can at least minimize your costs with a no annual fee credit card.
Who’s eligible for a 0% introductory APR?
Most credit card companies require you to have good to excellent credit to qualify for an introductory 0% APR offer. You should check your credit score before applying to make sure you meet the credit card issuer’s minimum requirements. If you apply and end up not getting approved, your credit score may be negatively impacted from the hard inquiry posted when the issuer pulled your credit report. Also, if you’re planning to carry a balance longer than the introductory period, or use an introductory 0% APR credit card to make everyday purchases, you might want to think twice for the reasons mentioned above. And if you’re in the habit of making late payments, an introductory 0% APR credit card may not be right for you. With these cards, even missing your monthly payment by one day could forfeit your zero percent introductory rate and send your interest rate soaring to the regular rate. You’ll also have to pay interest charges and late fees, especially if the card has an annual fee, which may add to these costs.
When shouldn’t you do a balance transfer to an introductory 0% APR card?
Some credit card issuers put a cap on the amount you can transfer with a 0% introductory promotional period. For example, if you have a $15,000 balance on another, higher-interest loan, and the balance transfer limit for the zero percent APR card is only $7,000, you won’t be able to transfer the full amount. In that case, taking advantage of a zero percent APR promotional period might not be worth it, especially after paying the balance transfer fee.
4 reasons to apply for a Discover credit card with a 0% intro APR offer
- To pay down high-interest credit card debt. When you’re in debt, interest payments and late fees can make paying off your credit card balance seem impossible. However, making a balance transfer to a credit card with an introductory 0% APR can be a great way to quickly reduce your debt. By consolidating your debt with a new credit card that has an introductory period with a 0% APR, you can simplify your payments and focus your efforts on paying off your card as soon as possible. When your credit card has an introductory zero percent APR on all of your transactions (purchases, balance transfers, and cash advances), your entire payment goes toward reducing your balance.
- To buy a big-ticket item or several one-time purchases. Whether you’re planning a vacation, buying a major appliance or facing several one-time purchases following a recent move, a credit card with an introductory 0% APR can save you money on interest. Instead of using a regular credit card and paying for those items plus interest, an introductory 0% interest credit card can help you stretch out your payments over time — without paying extra for your purchases during the specified introductory period.
- Celebrating the holidays. Using an introductory zero percent interest credit card during the holidays is a great way to lessen the financial strain from gift shopping, travel and entertaining. Plus, some Discover Cards with a 0% intro APR also offer cashback bonus rewards, with specified categories earning extra cash back on purchases.
- To pay down other loans. You can use introductory 0% APR balance transfer offers to reduce the interest you owe on other loans besides credit cards, including student loans, car loans and even home equity lines of credit. However, if you’re not sure that you can completely pay off your balance during the introductory period, you might face a high APR at the end of the intro period. Credit card interest rates are normally higher than rates for many loans, so be careful that you’re not trading a low interest rate on a loan balance for a higher credit card APR.
Tips for using an introductory 0% APR credit card
Don’t spend more than you can afford
It’s tempting to see an introductory zero percent APR credit card as a source of free money, but you should always have a plan to have the balance paid off by the end of the intro term. It’s best to use a card with a low interest rate for items you would buy anyway or to reduce balances on cards with higher interest rates.
No interest doesn’t mean no minimum balance due
Even though you don’t have to pay interest during the time when you have an intro 0% APR, you still have to make a minimum payment each month. If you miss the required payment, you’ll lose your introductory rate and incur late fees.
Know when the 0% APR intro period is ending
It’s easy to get into the habit of letting your balance grow when you’re not paying interest, but if you fail to pay your outstanding balance before the zero percent APR intro period ends, you may struggle to pay the balance and the higher interest back, leaving you further in debt.
0% intro APR credit card FAQs
What credit score do I need to get an introductory 0% APR credit card?
You need to have good credit to get an intro zero percent APR intro offer, but the exact number varies for different credit card issuers. Generally, introductory 0% credit card offers go to borrowers with higher FICO® Scores.
How Do I Avoid Paying Interest on a 0% Intro APR Credit Card?
You’ll need to pay the minimum payment due every month to take advantage of the introductory zero percent APR offer. Also, make sure you pay off the full balance before the end of the introductory period, because any balance left on the card will accrue interest at the regular APR.
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