5 ways a 0% APR credit card could actually hurt your credit

There are a lot of good reasons to apply for a zero-interest credit card. The best 0 percent intro APR cards offer between 15 and 21 months of zero interest on purchases, offering plenty of time to pay off balances before the 0 percent intro APR expires. A credit card that offers zero interest for a year or more can be an excellent way to fund a large purchase, manage current debt or pay down old balances.

That said, there are ways in which a 0 percent credit card can actually hurt your credit. If you’re not careful, you could find yourself with more debt than you started with — and a lower credit score than you were expecting.

How can a zero APR card hurt your credit? It all depends on whether you pay off your balances promptly or let them pile up. Here are five ways a 0 percent credit card can hurt your credit — and five ways to prevent the damage.

1. Credit score dips when applying for new cards

In most cases, applying for a new credit card will cause your credit score to dip — but you won’t lose a lot of credit score points, and the effect is only temporary. Credit scoring services like FICO and VantageScore use this metric as a way to gauge whether you’re applying for too much new credit at once, and as long as you’ve waited at least 90 days since your last credit card application, you shouldn’t have to worry about the impact on your credit score.

2. Increasing balance during zero-interest period

If you use the 0 percent intro APR period to run up higher balances than usual, you might end up with the kind of credit utilization ratio that has a negative effect on your credit score. Remember, even though some rewards credit cards feature solid intro 0 percent APR offers, it’s important to stay focused on paying down your debt during the the intro period and not chasing rewards.

Credit scoring services look very carefully at the ratio of your current balances to your available credit, and it’s a good idea to keep your credit utilization ratio below 30 percent whenever possible. This means that if you have $10,000 in available credit across all of your credit cards, you should try to keep your total credit card balance below $3,000. Otherwise, you might find it more difficult to maintain a good credit score.

3. Carrying higher balances after introductory offer expires

Carrying high balances on a 0 percent intro APR card might cause short-term damage to your credit score — but carrying those balances after the introductory APR expires creates a long-term problem.

Once your zero-interest period ends, any unpaid balances will begin to accrue interest at the regular interest rate. These interest charges become a part of your credit utilization ratio, lowering your credit score month over month — and since credit card interest compounds, it might become even more difficult to pay off your outstanding balances. That’s why it’s a good idea to pay off as much of your 0 percent APR credit card as you can before the introductory APR expires.

4. Trouble making your monthly payments after the introductory APR expires

As your credit card balances get higher, your monthly minimum payment goes up. If you’re already having trouble making your credit card payments, you might find yourself in a situation where you’re no longer able to afford the monthly minimum — and you might end up missing a credit card payment, which is one of the worst things you can do to your credit score.

In this situation, the best thing you can do is contact your credit card issuer and ask for help. Your issuer may offer a lower monthly payment or guide you toward a hardship program that can help you manage your debts and your finances.

5. Defaulting on your debt

If you run up high balances, miss multiple monthly payments and find yourself in a position where you can no longer manage your debts, you might end up in credit card default.

Defaulting on your debt is the kind of financial problem that has a lasting negative impact on your credit since the derogatory marks that appear on your credit reports after you default could stay there for as long as seven years. To avoid this, consider seeking out debt relief as soon as you find yourself in a position where you are no longer able to make payments on your credit cards.

The bottom line

Nearly all of the ways an intro 0 percent APR credit card can hurt your credit come down to how you manage your credit card balance. If you have the resources to keep your credit card balances below 30 percent of your available credit, and if you’re able to pay off as much of your debt as possible before the introductory APR offer expires, you probably won’t have to worry about whether a 0 percent credit card will hurt your credit.

On the other hand, if you’re not sure whether you will be able to pay off your credit card balances in a timely manner, you should carefully weigh the pros and cons before applying for a new 0 percent intro APR credit card.