With so many different credit card allowances and introductory offers, you might be wondering: “Annual Percent 0%?”
This is a good question. As in most cases, there are pros and cons of favoring 0% APR credit card.
Here’s what you need to know to help you determine if a 0% APR credit card is a great addition to your wallet.
Advantages of 0% APR credit card
APR 0% credit cards provide cardholders with an introduction period (usually six to 21 months) during which they do not incur interest on their credit card balance. This period can be very helpful if your goal is to pay off your credit card debt. After the introduction period, a new APR will be provided to the cardholder; this rate will vary based on the terms of the credit card and the cardholder’s reputation.
Related: Are you very concerned about credit card APR?
Large purchases without interest
If you know you won’t be able to repay a large purchase right away, a 0% APR credit card can give you some extra time to pay off your purchase without any interest.
Before you buy a large sum on a 0% APR card, make sure you have plans to pay it off. In the short term, it seems that blind charges to 0% APR cards are acceptable. However, if you are unable to pay off the fees before the end of the APR introduction period, you will start incurring significant interest.
Related: What is the APR for a credit card?
Repay existing balance without paying interest
If you hold a balance on another credit card, you can transfer that balance to 0% of your APR credit card. You can then work hard to repay the balance without further interest.
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Related: Best 0% APR Credit Card
Improve credit score
Paying debt can help improve your score because it will reduce your credit utilization and making on-time payments on your card is the most important factor in determining your FICO credit score.
Earn rewards
Some interest-free credit cards offer other reward plans, such as cash back or bonus points, which may lead to more savings. This can include welcome offers based on every dollar you spend as well as cash back or reward points.
For example, No Young Chase Freedom Infinity® (see Fees & Fees) earns at least 1.5% cash back on all purchases, while offering generous APR introductory.
With Chase Freedom Unlimited, your 0% APR introduction time will last 15 months for purchases and balance transfers. After that, 18.99% to 28.49% of APR variables will be applied. To learn more, check out our full review of Chase Freedom Unlimited.
Related: Why Chasing for Freedom Should Be the First Card in Every Student’s Wallet
Disadvantages of 0% APR credit card
Of course, 0% APR credit cards do have some drawbacks.
0% won’t last forever
It is important to remember that the introductory 0% APR period will eventually end. If you have not paid your balance in full within the time of expiration, you will be interested in that balance at the end of that period.
Related: What happens when 0% APR ends?
Balance transfer fee
If you want to transfer your balance from another card to 0% APR credit card, a balance transfer fee will be charged. It’s usually 3% to 5% – probably much lower than the APR you’ve already paid for, as the current average credit card APR is over 20%. However, if the balance transfer is considered to pay off your credit card debt, that fee should be considered.
Strict terms and conditions
Be sure to read the terms and conditions of the card. For example, some cards only apply 0% of the APR quote to new purchases and do not extend it to balanced transfers. Also, if you have late payments, most of them will shorten your 0% APR period. Understand the terms of your proposal to avoid any unpleasant surprises.
Make sure you verify that the card you are interested in is offering a true 0% APR offer or deferred interest offer. With deferred interest, your credit card will still generate interest during the deferred interest period. If you do not pay off the entire fee within a certain time frame, you are only responsible for paying that interest. Deferred interest is usually seen on store cards.
Wrong sense of security
While repaying the balance in full each month is ideal, a 0% APR card can be a useful tool for managing large purchases or debt, if used responsibly.
That being said, if you go beyond your credit card on your credit card, the credit card reward will be able to offset the interest you incurred. If a period of no cumulative interest can induce you to spend more than you can repay, a 0% APR credit card may do more harm than good.
Related: TPG’s 10 Credit Card Commandments Rewards
Is 0% APR worth it?
Whether 0%APR is worth it depends on your financial goals and habits. If you can pay off your credit card balance in 0% of the April period or pay back a lot of money, getting this discounted credit card can save you some big money and keep you from paying unnecessary interest.
However, if interest is not incurred, you will induce you to spend more than you pay on your credit card, and it will ultimately not be worth it.
Related: How to Avoid and Reduce Credit Card Interest
Bottom line
A 0% APR credit card is a good choice for those who want to pay off their credit card balance without charging interest. However, this is not the perfect solution for everyone. Before applying, consider the terms and debt payment plan of the card to ensure you benefit from 0% APR credit card.
Related: How to choose a credit card with 0% APR
