Are you applying for a new credit card? If so, you’ve probably encountered 0% APR offers. In the right situation, this perk can be hugely beneficial. A 0% APR credit card offer can help you pay off your debt or cover costs in an emergency. But there’s a catch: no 0% APR offer lasts forever.
What does it mean when a credit card offers 0% APR? And when and how should you use such an offer? Let’s dig deeper.
What is a 0% APR offer?
A 0% APR (Annual Percentage Rate) is a 0% interest rate. That means that if you take a credit card with a 0% APR, you won’t have to pay interest on your balance.
However, there are limits to this policy. You’ll have to follow certain rules in order to qualify. And you won’t get away with paying no interest indefinitely. 0% APR offers only last for a set period of time, as detailed in the “Schumer Box” that highlights the terms of your offer. After that promotional period ends, your APR will likely shoot up.
Also, a 0% APR offer won’t necessarily apply to all types of spending. These promotional offers may apply to balance transfers, cash advances, purchases, or a combination of the three.
Types of 0% APR offers
Select credit cards offer 0% APR on balance transfers, while others also provide a 0% APR on your purchases during the promotional period. These periods will vary, but popular credit cards offer no interest terms lasting 12 to 21 months.
Balance transfer offers
A balance transfer offer lets you transfer your balance from your current credit card to a new one. This strategy enables you to move balances from an account that charges a high rate of interest to one that is more affordable.
Once you’ve moved your balance to your new 0% APR credit card, you won’t have to pay interest on it for a set period of time. However, you’ll likely still have to pay a balance transfer fee. If you can qualify, seek out a 0% APR credit card without a balance transfer fee, like the Amex EveryDay Credit Card.
Also, a 0% APR balance transfer offer doesn’t mean you’ll be interest-free for all purchases. While you won’t have to pay any interest on your initial (transferred) balance, you’ll have to pay interest on your balance from any future purchases.
With a purchase offer of 0% APR, you won’t have to pay interest on any purchases you make during the promotional period, even if you carry a balance. This can be helpful if you’re using your new credit card to make a large purchase that you’ll pay off throughout the promotional period.
However, you should only use this strategy if you’re sure you can pay off your balance in full before the promotional period ends. Some 0% APR credit cards charge retroactive interest if you carry a balance beyond the introductory period.
Cash advance offers
A cash advance is when a credit card company sends you money from your credit limit. This money can be used for anything you like and is not restricted to paying off another balance. You can redeem a cash advance opportunity through your bank’s online portal or via a cash advance check.
Some cash advance checks offer a 0% APR for a limited time, though you’ll have to pay a fee to qualify. And some banks offer longer promotional terms in exchange for higher fees.
The fee will be a percentage of the cash advance amount, and will be clearly stated on the cash advance offer. Most banks today charge a cash advance fee of 3% to 5% of your cash advance.
Does it cost money to transfer your balance to a 0% APR credit card?
There are no fees involved with a 0% APR purchase offer. But if you want to transfer your balance on your current credit card over to your new one, you’ll probably have to pay a balance transfer fee.
Balance transfer fees are usually 3% to 5% of the amount you transfer. For example, if you transferred a $2,000 balance and the bank charged a 5% fee, you’d pay $100. And most banks have a minimum fee for low-balance transfers.
How should you use your 0% offer?
When you take a 0% APR offer, you’ll have to follow some basic rules.
First, you must make your payments on time every month. If you miss a payment or pay late, the bank will cancel the remaining term of your 0% APR promotion.
Second, if you exceed your credit limit, the bank can cancel your 0% APR promotion. Pay close attention to your available credit and make sure that you don’t go over your limit.
Is a 0% APR offer right for you?
There are many reasons why someone would apply for a credit card with a 0% APR offer. Here are three of the most common reasons:
- High-interest debt. Are you paying too much interest on your debt? Transferring your balance to a 0% APR offer can save you money and make it easier to pay off the debt.
- Emergencies. Ideally, you should have three to six months’ of expenses in an emergency fund. But studies show that in emergencies, many families can’t pay a $1000 bill without going into debt. Better to pay for such an expense with a 0% APR offer than a high-interest credit card.
- Large purchases. Even the most financially savvy people struggle to pay off large purchases. By applying for a credit card with a 0% APR, you can soften the blow to your budget by spreading out the cost over a year or more.
Which credit cards offer 0% APR?
Although some of your credit cards may offer cash advance checks, most consumers are better off applying for a new credit card to choose from among the best 0% APR offers available.
These are the best credit cards to add to your wallet:
Avianca Life Miles Vida Visa provides a 20,000 point welcome bonus after your first purchase that can be used for travel, gifts, or other perks. This credit card also offers 0% APR on balance transfers for 12 months. There is an annual fee, but it’s reasonable considering the perks that go with it.
Chase Slate offers a 0% APR for 15 months on both purchases and balance transfers. There is no annual fee and you won’t be charged a balance transfer fee for the first 60 days.
Citi Simplicity has the longest 0% APR on balances transfers at 21 months. There is no annual fee, but there is a 3% balance transfer fee (minimum $5).
Discover it is a good card to keep long after the 0% APR offer of 14 months runs out. It offers quarterly rotating categories where you’ll earn 5% cashback at specific merchants. There are no annual fees.
Before committing to a credit card offer, take a look at other opportunities. It’s important to compare several different credit card offers to find the best fit for your circumstances. Compare personal credit cards side-by-side here.
If you are struggling to pay off your credit card balances, consider speaking with a debt relief professional or a bankruptcy attorney.
Lee Huffman is a former financial planner and corporate finance manager who now writes about early retirement, credit cards, travel, insurance, and other personal finance topics. He enjoys showing people how to travel more, spend less, and live better.