A 0% introductory APR credit cards charge no interest for an introductory period, this kind of card could be a great way to pay down your debt without also paying on interest. In addition to the introductory period, be mindful of the ongoing APR and any balance transfer fees before choosing a card.
While balance transfer cards don't charge interest, most do impose an origination fee. When you move your balance over, you'll be charged anywhere between 3% to 5% of the total amount being transferred. In most cases, this fee will be minor when compared to the savings you get from deferring your interest.
As we mentioned above, there’s more than one type of 0% APR offer. These offers are typically designed for two specific situations.
If you have existing credit card debt, you can take advantage of a 0% APR offer to transfer your balance and pay down that debt faster since you won’t have to worry about paying the interest too. Another type of 0% APR offer applies to new purchases rather than existing credit card debt.
Let’s break down both types to see which makes more sense for you.
1) 0% APR offers for balance transfers
A 0% introductory APR offer on balance transfers means you won’t be charged interest on a balance you transfer from another credit card for a certain period of time. This can be a huge help if you’re trying to pay off your debt but high interest charges are getting in the way.
Just keep in mind, these offers almost always come with a time limit. If you don’t pay off your full balance within the intro period, you might have to pay a much higher interest rate on the remainder.
2) 0% APR offers for purchases
A purchase APR is the interest rate applied to your purchases if you carry a balance on your credit card. So if you apply for a credit card with a 0% introductory purchase APR, that means you won’t be charged interest on your purchases for a certain period of time as determined by your credit card company.
These cards can come in handy if you need to make a large purchase. In fact, the very laptop I’m using to type out these words was bought with a 0% APR credit card and paid off within a few months.
It’s important to note that using these types of credit cards takes a lot of discipline. You’ll need to compare credit card offers, make a plan to pay off your debt and avoid using your card to rack up new debt while you pay off existing debt.
If you know you’ll have a hard time staying disciplined, then a credit card with a 0% intro APR offer might not be for you.
Debt relief is possible with a 0% introductory APR balance transfer credit card. You can transfer your debt from another issuer onto the credit card with lower interest. Most cards charge a balance transfer fee of 3% to 5% of the amount transferred, but some no balance transfer fee credit cards eliminate that cost. Consider whether the balance transfer fee offsets the cost of interest payments.
Check the timeframe you need to pay off your balance. The length of the promotional period can vary widely. Some issuers offer introductory 0% APR periods of six to 12 months or longer. You should seek a card that lets you pay off most or all of your balance before the promotional rate expires.
Find a suitable ongoing APR. When a card’s ongoing APR kicks in after the introductory 0% APR period, it can get expensive if you still have a hefty unpaid balance. Look for a card that offers a low ongoing interest rate that you’ll be able to manage if you don’t pay off your balance in time.
Decide other benefits you might want. You might want a card that includes some incentives for keeping it around after the promotional APR offer ends. You can find cards that offer lengthy introductory 0% APR periods as well as rewards, but check whether the rewards rates on those cards fit your spending profile. If you tend to carry a balance, the high ongoing interest on many rewards cards could eat away at any rewards you might earn.
Weigh the cost of an annual fee. Most 0% intro APR credit cards don’t charge an annual fee, but some do. Determine whether the benefits outweigh the annual cost of the credit card.
Ask when the 0% intro APR expires -- Call or send a secure message to your card company to find out the exact date when the 0% intro APR on your credit card will end and make a note of it. Seek to pay off your balance in full by this date. Don’t make the mistake of carrying a balance after the 0% period expires simply because you weren’t aware of the cutoff date.
Avoid fees -- Some balance transfer cards waive balance transfer fees when you make a balance transfer within 60 days of account opening. To get the most benefit from these offers, you should make any balance transfers as soon as possible. Some cards let you make a balance transfer request at the time of application, ensuring that your balance transfer will be free of fees.
Be smart about payments -- Remember, only payments in excess of your minimum payment will be applied to the highest APR balance. Therefore, if a card only offers a 0% intro APR on one type of balance (purchases or balance transfers), then make sure to pay an amount equal to your minimum payment plus the high APR balance each month. You’ll avoid a situation where you pay down a 0% intro APR balance while letting another type of balance build up at a double-digit APR.
Keep your card open and active -- After the 0% intro APR period ends, it’s smart to use your card for a purchase every few months so it continues to report your good payment history to the credit bureaus. Having a card with a long history of 100% on-time payments can help boost your score over 800, a level where you’ll qualify for the best rates and terms on virtually any kind of financing.
Weigh the value of rewards -- While rewards cards may give you cash back or travel value for using the card to make purchases, the longest 0% intro APRs are typically offered by cards that do not have rewards programs. Forgoing a rewards card may be smart if you need the extra time to pay down a balance before interest accrues.
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