How a 0% Intro APR credit card can help you avoid sky-high interest this year

How would you like an interest-free loan to pay off a debt or to cover a big purchase this year? It’s not as far off as you might think if you know how to strategically use a 0% introductory APR credit card.

Credit cards that offer 0% introductory APR allow you to carry a balance for a specific period, typically nine to 21 months, without accruing interest. Depending on the type of card, you may be able to make new purchases, transfer balances from another account or two.

Given that the the average credit card interest rate it is currently more than 20%, which can mean thousands of dollars in savings. Just make sure you have a plan to pay off your balance before the end of the promotional period, or interest will begin to accrue on the remaining balance.

If you carry a balance on your card, want to save money or just need a break from interest charges, here’s how to take advantage of these promotional offers, as well as some other options worth considering.

What does 0% intro APR mean?

A 0% intro APR offer technically means the annual percentage on your credit card is 0% for a specified period after opening the account. After this window closes, the regular variable APR will apply to any outstanding balance you have on your card.

The actual length of the 0% APR period, and what type of transaction it applies to, will depend on the card. Introductory periods may apply to new purchases, balance transfers oh two If the card offers an introductory period on new purchases, you will not accrue interest on particular transactions. You still have to do what is necessary minimum monthly payments and repay the balance before the end of the promotional period.

If the card offers a promotional period for balance transfers, you won’t accrue interest on balances you transfer from other credit cards. You may also have to pay a balance transfer fee.

What are the balance transfer fees?

A balance transfer (or card) offer can help reduce the interest you pay on the credit card debt you already have. To take advantage of a 0% APR balance transfer offer, you’ll usually have to pay a balance transfer fee (typically 3% to 5% of the total balance you’re transferring) or a flat fee – generally, whichever is greater. .

If your 0% introductory APR offer has a balance transfer fee, you’ll be charged every time you move a balance to the card. Keep this in mind when deciding whether transferring your credit card debt will save you money or just add to the balance you want to pay off.

How does a 0% APR introductory offer work?

If you plan to use the 0% introductory period of a card, make sure you understand what purchases or transfers qualify. This way, you can start taking advantage of the offer as soon as you are approved. Also find out if the promotional offer applies to new purchases, balance transfers or both.

There may also be additional rules for how long you have to make balance transfers. For example, some credit cards may offer 0% introductory APR for the first year or longer, but any balance transfers must be made within the first few months.

Just because it’s a 0% APR card doesn’t mean it’s fee-free. There may also be fees for late payments, cash advances and foreign transactions. Many of these fees may apply during the 0% introductory period, including balance transfer fees.

It is also important to understand the consequences if you do not make at least your minimum payments during the promotional period. Most 0% APR offers include high fees for late payments, and some credit card issuers may cancel the 0% APR promotional offer or apply a higher APR penalty. if you miss payment. Depending on the issuer’s terms, you may begin to accrue interest on your balance immediately. Read the fine print in any agreement before signing.

Is a 0% APR offer the same as deferred interest?

Dealers who advertise “no interest if paid by x date” are referring to a deferred interest offerwhich is different from a 0% APR offer. With a deferred interest offer, you don’t owe any interest if you pay your balance in full at the end of the promotional period. If you do not cover the entire balance before the end of the promotional period, the interest that you have deferred will be added to your balance.

With a 0% APR offer, on the other hand, as long as you make the required minimum payments, you will begin to accrue interest on the remaining balance only once your introductory period is over.

Here’s one way to see it: If you have a doubt that you will be able to pay off your balance before the end of the promotional period, go with a 0% intro APR offer instead of a deferred interest offer.

What happens when a 0% APR period ends?

Credit cards with a The 0% APR introductory offer only lasts for a limited time – usually between nine and 21 months. After that, a variable APR will apply, and any outstanding balance will get the higher interest rate.

If you are unable to pay the remaining balance at the end of the promotional period, you have a few options. One is to do it another balance transfer and move your remaining balance to the new card to have additional time to pay off your debt. Another option is to apply for a fixed rate personal loan.

7 things to know about 0% APR credit cards

1. The introductory offer can apply to new purchases or balance transfers

Before you apply for a card with a 0% APR introductory period, find out if it applies to new purchases, balance transfers or both. Check what eligible purchases or transfers qualify so you can start taking advantage of the offer as soon as you are approved.

2. Introduced 0% interest periods vary

Credit cards with an introductory 0% APR offer last a certain amount of time – usually between nine and 21 months. After that, a variable interest rate is applied. Any outstanding balance will begin to accrue interest thereafter.

Before you apply, see how long the 0% APR introductory offer lasts. If you are planning to make a large purchase or debt transfer to take advantage of the 0% interest, make sure the balance is paid before the introductory offer ends. If possible, choose a card with the longest introductory period.

3. A balance transfer card can help pay off debt and reduce interest

If you’re looking to cut the interest you pay on your credit card balance, a balance transfer card allows you to move the debt to a new card with a lower interest introductory offer. Make a plan to pay off the balance in full before the offer ends to avoid being hit with a higher variable interest rate.

4. Some 0% introductory offers come with fees

If you transfer a balance, you may have to pay a balance transfer fee of 3% to 5% of the amount. Depending on how much debt you have to transfer, you may have to multiple transfers over time and pay several balance transfer fees.

Although a 0% introductory APR offer may sound good, always read the fine print. You may also have fees for late payments, cash advances and foreign transactions that may also apply during the introduced period.

5. You are still responsible for monthly payments

You will not be charged interest during the introductory period of your card, but you will need to make monthly payments to keep your account current. Missing a payment or paying late can mean heavy charges and can void your 0% APR offer entirely, depending on your issuer’s terms. You may also start accruing interest at a higher penalty rate on your balance immediately.

6. You usually need good or excellent credit for approval

Many credit card offers, such as interest-free periods and rewards, require a good to excellent credit score, which is usually 670 to 850.

While browsing offers, see what the minimum credit score requirement is. If you don’t seem to qualify for any balance transfer offers, consider build your credit score. You can start with a credit card, such as a secured credit card, to establish good credit habits such as paying your bill in full and on time each month. As your score increases, you may qualify for a 0% APR card and other cards with rewards and benefits.

7. Don’t cancel your credit card after you’re done with the 0% intro APR period.

Canceling a credit card can hurt your credit scoreso it is better to keep the account open and continue to make timely payments. As you compare 0% intro APR credit card offers, also look at any rewards and cash-back offers. If you plan to continue using the card, you can earn rewards on your future purchases.

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