A 0% APR credit card is a valuable financial tool that offers an interest-free period on qualifying transactions, typically ranging from six months to almost two years. During this promotional period, you won’t be charged interest on purchases, balance transfers, or sometimes both, depending on the card’s specific terms. Once this introductory period ends, the card’s standard, ongoing APR will apply to any remaining balance.
However, not all 0% APR offers are the same, and understanding the fine print is crucial before applying.
How 0% APR Credit Cards Work
These cards are commonly used for two main purposes:
- Balance Transfers: You can move existing credit card debt from other issuers to the 0% APR card. This can help you consolidate debt, save on interest payments, and simplify your monthly bills, allowing more of your payment to go towards the principal.
- Big Purchases: If you plan to make a significant purchase, a 0% APR card can allow you to pay it off over time in interest-free installments, provided you clear the balance before the promotional period concludes.
Key Considerations Before Applying
- The 0% May Not Apply to Everything:
It’s essential to read the Schumer box (a summary of rates and fees) to understand which types of transactions qualify for the 0% APR. Different interest rates can apply to different activities on the same card:
- Purchase APR: This is the interest rate on new purchases. Ensure the 0% offer applies to purchases if that’s your goal. Note that if a card offers 0% on both purchases and balance transfers, the length of the promotional period might differ for each.
- Balance Transfer APR: This is the rate for transferring debt. Confirm the 0% offer applies here to avoid paying interest on top of balance transfer fees.
- Cash Advance APR: Cash advances rarely qualify for 0% APR and often come with a higher interest rate and a fee, with interest accruing immediately.
- Penalty APR: Certain actions, like failing to make a minimum payment within 60 days, exceeding your credit limit, or a bounced payment, can trigger a high penalty APR, overriding your 0% offer. These actions can also significantly damage your credit score.
- Your 0% APR Deal Could Be Canceled:
Even with a 0% APR, you must always make your minimum monthly payments on time. A single late payment can result in the card issuer canceling your 0% offer and reverting your interest rate to the ongoing APR. This also incurs late fees and negatively impacts your credit score, as payment history accounts for 35% of your FICO score. Setting up automatic payments can help prevent this. While paying only the minimum avoids late fees, it won’t significantly reduce your debt.
- Big Balances Can Still Hurt Your Credit Scores:
The amount of money you owe (your credit utilization ratio) accounts for 30% of your FICO score. Even at 0% APR, carrying a high balance means a high utilization ratio, which can negatively impact your score. It’s generally recommended to keep your credit utilization below 30% of your limit. If you’re using the card for a large purchase, aim to pay it down quickly, or consider making multiple payments each month to keep your utilization low.
- Interest Will Be Charged on Any Balance Left When the 0% Period Ends:
The interest-free period is temporary. Once it expires (usually 6 to 21 months), the card’s regular, often double-digit, APR will apply to any remaining balance. The issuer is not obligated to remind you of this. It’s crucial to set calendar reminders and plan to pay off your balance in full before the promotional period ends to avoid interest charges.
- You Might Not Be Eligible for the Offer:
There’s no official limit on the number of 0% APR cards you can have, but each lender has limits on the total credit they’ll extend. Many banks also have restrictions on balance transfers (e.g., Chase caps balance transfers at $15,000 within any 30-day period and generally doesn’t allow transfers between their own cards). Crucially, the best 0% offers typically require good to excellent credit for approval.
- You Might Not Get Approved for as Much Credit as You Need:
There’s no guarantee you’ll receive a credit limit high enough to cover your entire debt transfer or large purchase. Credit limits are typically revealed only after approval. If you need to transfer $10,000 but are approved for only $5,000, you’ll still need to find a solution for the remaining amount.
- The Usefulness of a 0% Deal Depends on Your Habits:
If you always pay your credit card balances in full each month, a 0% APR offer might not provide much benefit, as you’re already avoiding interest. In such cases, a rewards credit card might be more suitable. A 0% APR card is most beneficial for those who specifically plan to consolidate debt or finance a large purchase over time.
Sample 0% APR Credit Cards (as of current information):
- Wells Fargo Reflect® Card:
- APR: 0% intro APR for 21 months on purchases and qualifying balance transfers, then 17.24%, 23.74%, or 28.99% Variable APR.
- Balance Transfer Fee: 5% ($5 minimum).
- Rewards/Bonus: None.
- BankAmericard® credit card:
- APR: 0% Intro APR for 18 billing cycles for purchases, and for any balance transfers made in the first 60 days. After that, a Variable APR that’s currently 15.24%-25.24% will apply.
- Balance Transfer Fee: 3% for 60 days from account opening, then 4%.
- Rewards/Bonus: None.
- Chase Freedom Unlimited®:
- APR: 0% intro APR on purchases and Balance Transfers for 15 months, then 18.99%-28.49% Variable APR.
- Balance Transfer Fee: Intro fee of 3% for the first 60 days; after that, 5% ($5 minimum).
- Rewards: 5% cash back on travel booked through Chase; 3% at restaurants and drugstores; 1.5% on other purchases.
- Bonus Offer: Earn a $200 Bonus after you spend $500 on purchases in your first 3 months.
- Wells Fargo Active Cash® Card:
- APR: 0% intro APR on Purchases for 12 months and 0% intro APR on Balance Transfers 12 months from account opening on qualifying balance transfers, then 19.24%, 24.24%, or 29.24% Variable APR.
- Balance Transfer Fee: Intro fee of 3% for the first 120 days; after that, 5% ($5 minimum).
- Rewards: 2% cash back on all purchases.
- Bonus Offer: Earn a $200 cash rewards bonus after spending $500 in purchases in the first 3 months.