Should You Apply for an Intro 0% APR Credit Card?

Have you received an offer from a credit card company with an introductory or promotional 0 percent APR, but you aren’t sure what it means? Let’s review what an intro 0 percent APR is, reasons why you might want to change to a credit card with an intro 0 percent APR, as well as tips that may best help you use a credit card with an intro 0 percent APR offer.

What does intro 0 percent APR mean?

APR stands for annual percentage rate, and it refers to the interest rate that your credit card charges you. An intro, or introductory 0 percent APR means there is a period of time after you open the account when the interest rate on transactions or balance transfers will be zero. Keep in mind: Just because APR stands for annual percentage rate, that doesn’t mean the intro APR offer will be for a whole year.

Most credit card companies typically require you to have good to excellent credit to qualify for an introductory 0 percent APR offer. You can check your credit score before applying to make sure you meet the credit card issuer’s minimum requirements. If you apply, a credit card issuer will pull your credit report, which is called a hard inquiry and can temporarily lower your credit score. So, if you want to avoid a ding to your credit, you may want to apply only if you think you’ll be approved.

How an intro 0 percent APR credit card works

Credit cards offering introductory 0 percent APR don’t charge interest for a specific time period–usually six months to a year–on purchases, balance transfers, or both. That could mean you can save on interest if you plan to carry a balance during the introductory period or transfer a balance from another card. After the intro period ends, the APR will change to the regular rate stipulated in the terms.

During the intro 0 percent APR period, you’ll need to pay at least the minimum payment due every month–just like a normal credit card–to take advantage of the offer. If you pay off the full balance before the end of the introductory period, you won’t accrue any interest, which may save you money.

What to look for in an intro 0 percent APR credit card offer

One of the first things you may want to determine is what types of transactions the 0 percent intro APR offer covers. Is it just on balance transfers, but everyday purchases will accrue interest at the standard rate? Or is the zero percent APR offer for both purchases and balance transfers? Knowing how you want to use the card can help you make a decision that’s best for your needs.

When comparing intro zero percent APR credit card offers, it’s also important to look at the length of the introductory period and what the standard APR will be after the intro period just in case you aren’t able to pay off your purchases or balance transfer debt before the promotional rate expires.

Also, make sure to take into account any balance transfer fees, which can range from 2%-5% of the transfer amount.

Additionally, you should know if the new card has an annual fee or not. An annual fee could completely offset the money you’re hoping to save on interest. When comparing, you can look for credit cards that offer no annual fee. By taking the time to research your options, you’ll find the introductory promotional period offer that’s right for you.

What to avoid when looking at intro 0 percent APR credit cards

While an introductory 0 percent 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 0 percent APR credit cards:

• Assuming the intro 0 percent APR will last forever. It won’t because it’s always an introductory rate. Once the promotional period expires, the interest rate defaults to the card’s regular APR, which will be found in the terms. In addition, the card may have a variable APR, which means the interest rate may fluctuate over time.
• Not paying off the balance in full before the 0 percent intro APR expires. Most people take advantage of introductory 0 percent 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. 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 0 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 percent intro APR period ends.
• Making purchases on a 0 percent intro APR balance transfer card. With an intro 0 percent APR offer that’s only good on balance transfers, you can usually carry the balance month-to-month while taking advantage of the interest savings. If you make purchases with the card, however, you’ll be charged interest because the 0 percent APR doesn’t apply to those transactions. Be sure to know if you have a card with an intro 0 percent APR promotional period that applies to both balance transfers and regular purchases.

When shouldn’t you do a balance transfer to an introductory 0 percent APR card?

There are circumstances when a balance transfer credit card may not be worthwhile for you. For example, if you don’t think you can pay off the balance by the end of the intro period, you could end up paying more in interest and fees than if you had left the balance where it was.

Another example would be if your current balance is small enough that you will likely pay it off in a few months. In this case, the balance transfer fee on the 0 percent intro APR card could be more than the amount you would save in interest.

Reasons to apply for a credit card with a 0 percent intro APR offer

• To pay down high-interest credit card debt. When you’re in debt, interest payments and late fees may make paying off your credit card balance difficult. However, making a balance transfer to a credit card with an introductory 0 percent APR can be one way to quickly reduce debt. By consolidating your debt with a new credit card that has 0 percent interest, you may be able to simplify your payments and focus your efforts on paying off your card sooner by putting your entire payment 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 intro 0 percent APR may be able to save you money on interest versus a regular credit card.
• Holiday shopping. Using an intro zero percent credit card during the holidays can be one way to lessen the financial strain from gift shopping, travel, and entertaining. Plus, some Discover Cards– with a 0 percent intro APR also offer cashback bonus rewards, with specified categories earning extra cash back on purchases around the holidays.
• To pay down other loans. You can use introductory 0 percent APR balance transfer offers to reduce the interest you owe on other loans besides credit cards, including 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 intro 0 percent APR credit card

Don’t spend more than you can afford

Have a plan to pay off the balance of an introductory 0 percent APR credit card 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

You still have to make a minimum payment each month even though you don’t have to pay interest during an intro 0 percent APR period. If you miss the required payment, you’ll lose your introductory APR rate and incur late fees.

Know when the 0 percent 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 0 percent APR intro period ends, you may struggle to pay back the balance and the higher interest, leaving you further in debt.

An intro 0 percent APR credit card can be beneficial for some people, and for others, it may not make sense to try to apply for one. Now that you know what 0 percent intro APR means, you can determine if one of these credit cards will be right for you.