How a 0% APR credit card can help you avoid sky-high interest this year

How would you like to get an interest-free loan to pay off a debt or cover a big purchase this year? It’s not as far-fetched as you might think if you know how to use a 0% APR introductory credit card strategically.

Credit cards that offer a 0% introductory interest rate allow you to carry a balance for a specified period, usually nine to 21 months, without accruing interest. Depending on the type of card, you may be able to make new purchases, transfer balances from another account, or both.

Given that Average credit card interest rate Currently over 20%, this can mean thousands of dollars in savings. Just make sure you have a plan to pay off your balance before the promotional period ends, otherwise interest will start accruing on the remaining balance.

If you have a balance on your card, want to save money or just need a break from interest charges, here’s how to take advantage of these promotions, plus some other options worth considering.

What does 0% intro APR mean?

A 0% introductory APR offer technically means… Annual Percentage Rate on your credit card is 0% for an introductory period specified when opening the account. After this window closes, the regular variable APR will apply to any outstanding balance you maintain on your card.

The actual length of the 0% APR period, and the type of transactions it applies to, will depend on the card. Introductory periods can be applied to new purchases, Balance transfers Or both. If the card offers an introductory period for new purchases, interest will not accrue on those specific transactions. You still have to do what you need Minimum monthly payments And pay the balance before the end of the promotional period.

If the card offers a promotional period for balance transfers, you won’t accrue interest on balances you transfer from other credit cards. You will still likely have to pay a balance transfer fee.

What are the balance transfer fees?

A balance (or card) transfer offer can help you reduce the amount of interest you pay on the credit card debt you already have. To take advantage of a 0% APR balance transfer offer, you’ll typically have to pay a balance transfer fee (usually 3% to 5% of the total balance you’re transferring) or a flat fee — generally, whichever is greater.

If your introductory 0% APR offer includes a balance transfer fee, you’ll be charged each time you transfer a balance to the card. Keep this in mind when deciding whether transferring your credit card debt will actually save you money or just add to the balance you want to pay off.

How does the 0% APR introductory offer work?

If you plan to use the card’s 0% introductory period, make sure you understand which purchases or transfers qualify. This way, you can start taking advantage of the offer as soon as it is approved. Also find out if the promotion applies to new purchases, balance transfers, or both.

There may also be additional rules about how long you have to make balance transfers. For example, some credit cards may offer an introductory interest rate of 0% for the first year or longer, but any balance transfers must be done in the first few months.

Just because it’s a 0% APR card doesn’t mean it’s fee-free. There may still be fees for late payments, cash advances and foreign transactions. Many of these fees may apply during the introductory 0% period, including balance transfer fees.

It’s also important to understand the consequences if you don’t make at least the minimum payments during the promotional period. Most 0% APR offers include steep fees for late payments, and some credit card issuers may cancel the 0% APR promotion or apply a higher APR penalty. If you miss payments. Depending on the issuer’s terms, you can start charging interest on your balance immediately. Read the fine print in any agreement before signing.

Is a 0% APR offer the same as a deferred interest offer?

Retailers advertising “no interest if paid by x date” refers to a Deferred interest offerwhich is different from the 0% APR offer. With a deferred interest offer, you won’t owe any interest if you pay off your balance in full by the end of the promotional period. If you fail to cover the entire balance before the promotional period ends, the interest you deferred will be added to your balance.

On the other hand, with a 0% APR offered, as long as you make the required minimum payments, you’ll start accruing interest on Remaining balance only Once the introductory period ends.

Here’s one way to look at it: If you’re in any doubt that you’ll be able to pay off your balance before the promotional period ends, go with an introductory 0% APR offer instead of a deferred interest offer.

What happens when the 0% APR period ends?

credit cards with The 0% APR introductory offer only lasts for a certain period of time – Usually between nine and 21 months. After that, a variable annual interest rate will apply, and any outstanding balance will receive a higher interest rate.

If you can’t pay the remaining balance by the end of the promotional period, you have a few options. One is done Transfer another balance Transfer your remaining balance to the new card so that you have additional time to pay off your debts. Another option is to apply for a personal loan with a fixed interest rate.

7 Things to Know About 0% APR Credit Cards

1. Introductory offer may apply to new purchases or balance transfers

Before you apply for a card with an introductory 0% APR, find out if it applies to new purchases, balance transfers, or both. Review your eligible purchases or transfers so you can start taking advantage of the offer as soon as you’re approved.

2. Introductory interest periods vary by 0%

Credit cards with an introductory 0% APR offer last for a certain period of time — usually between nine and 21 months. After that, a variable interest rate applies. Any outstanding balance will begin to accrue interest after that.

Before you apply, find out how long the 0% APR introductory offer lasts. If you’re planning to make a large purchase or transfer debt to take advantage of the 0% interest, be sure to pay off the balance before the introductory offer runs out. If possible, choose a card with a longer introductory period.

3. A balance transfer card can help you pay off debt and lower interest

If you’re trying to reduce the interest you’re paying on your credit card balance, a balance transfer card lets you move the debt to a new card with an introductory low-interest offer. Make a plan to pay off the balance in full before the offer expires to avoid being hit with a higher variable interest rate.

4. Some 0% introductory offers come with a fee

If you are transferring a balance, you may have to pay a balance transfer fee of 3% to 5% of the amount. Depending on how much debt you have to transfer, you may have to pay it off Multiple conversions over time And pay several balance transfer fees.

Although an introductory 0% APR offer may seem nice, always read the fine print. There may also be fees for late payments, cash advances and foreign transactions that may still apply during the introductory period.

5. You are still responsible for the monthly payments

You won’t be charged interest during your card’s introductory period, but you’ll need to make monthly payments to keep your account current. Failure to make or late payment may mean onerous fees and may void the 0% APR offer altogether, depending on the issuer’s terms. You can also start accruing interest at a higher penalty rate on your balance immediately.

6. You usually need good or excellent credit to get approved

Many credit card offers, such as interest-free periods and rewards, require a good to excellent credit score, which typically ranges from 670 to 850.

As you browse offers, find out what the minimum credit score requirements are. If you don’t seem to qualify for any balance transfer offers, think about it Build your credit score. You can start with a credit builder card, such as a secured credit card, to establish good credit habits such as paying your bill in full and on time each month. As your score increases, you’ll be able to qualify for a 0% APR card and other cards with rewards and perks.

7. Don’t cancel your credit card after the initial 0% APR period has finished.

Canceling a credit card could hurt Your credit scoreso it is better to keep the account open and continue making payments on time. While you’re comparing 0% APR credit card offers, also look at any rewards and cash back offers. If you plan to continue using the card, you can earn rewards on your future purchases.

Frequently asked questions