You’re interested in understanding 0% APR credit cards, and the provided text offers a comprehensive overview. Here’s a summary of how they work, along with key considerations and tips for maximizing their benefits:
What are 0% APR Credit Cards?
A 0% APR credit card offers an introductory period, typically ranging from six to 21 months, during which no interest is charged on specific transactions. This can apply to new purchases, balance transfers, or sometimes both, depending on the card’s terms.
Their primary purpose is to help consumers:
- Consolidate credit card debt by transferring high-interest balances to the new card.
- Finance large purchases over time without incurring immediate interest charges.
Key Aspects and “Quirks” to Understand:
- Not All Transactions Qualify: The 0% APR usually applies to new purchases and/or balance transfers. Cash advances and other transactions are typically excluded.
- Varying Interest-Free Periods: The length of the 0% APR period can differ between purchases and balance transfers on the same card. Some cards might only offer 0% APR on one type of transaction (e.g., only balance transfers).
- Credit Limit Limitations for Balance Transfers: While you’re approved for a certain credit limit, card issuers often set a lower cap on how much of that limit can be used for balance transfers. For example, a $30,000 credit limit might only allow a $15,000 balance transfer.
- Balance Transfer Fees: Most balance transfer cards charge a fee, typically 3% to 5% of the transferred amount. While this adds to your debt, it’s often outweighed by the interest saved during the promotional period. Some “no-fee” balance transfer cards exist, but they are less common.
- Credit Score Requirement: To qualify for most 0% APR cards, you generally need good credit (670-739 FICO score) or excellent credit (740+ FICO score). If your score is lower, you might find shorter intro periods or need to consider alternative debt-payoff methods like personal loans.
- Risk of Offer Cancellation: If you fail to make at least the minimum payment on time, the issuer can cancel your 0% APR offer and apply a higher penalty APR, potentially to your existing balance.
- Interest After Intro Period: Any remaining balance after the 0% APR period ends will immediately start accruing interest at the card’s regular, variable APR. It’s crucial to pay off the balance before this happens to maximize savings.
- Deferred Interest (Important Distinction): Some cards, particularly store cards, use “deferred interest” offers. This is different from a true 0% APR. With deferred interest, if you don’t pay off the entire balance by the end of the promotional period, all the interest that would have accrued since the purchase date will be retroactively charged to your account. The cards mentioned in the provided text do not charge deferred interest.
How to Maximize the Benefit of a 0% APR Card:
To truly benefit from a 0% APR card and avoid unnecessary interest, follow these tips:
- Read the Fine Print: Thoroughly review the terms and conditions, including the expiration date of the 0% APR, any balance transfer fees, the timeline for completing balance transfers, and the interest rate that applies after the intro period.
- Create a Repayment Plan: Calculate how much you need to pay each month to have a zero balance by the time the 0% APR period ends. Divide your total balance by the number of months in your intro period to determine your required monthly payment.
- Pay Off Your Balance in Full: Your ultimate goal should be to eliminate the entire balance before the promotional period expires to avoid any interest charges.
Note: The information provided indicates that Discover cards are currently not available on CNBC Select, and the Chase Slate® Credit Card is not currently in the market. You should consult their respective websites or current credit card marketplaces for up-to-date offers.