What does 0% APR mean?

When you want to avoid interest on a large purchase or pay down a credit card balance faster, a 0 percent intro APR offer can help you make it happen. Annual percentage rate, or APR, is a metric that shows the actual cost of borrowing money through a credit card, loan or another line of credit for one year. It’s generally interchangeable with the credit card interest rate. Getting an offer for 0 percent intro APR means no interest will be charged on the money you borrowed for a fixed period of time.

However, individual 0 percent APR credit card details vary quite a bit, with some offering longer introductory periods and more perks than others. Fees can vary too, including annual fees and balance transfer fees which could cut into your savings on interest. Is a 0 percent APR credit card right for you? We’ll teach the ins and outs, plus mistakes to avoid with 0 percent intro APR offers.

How does a 0% intro APR work?

You’ve probably seen the tempting 0 percent introductory APR offers that credit card companies use to attract new cardholders. But what does a 0 percent introductory APR offer really mean? In most cases, a 0 percent intro APR is a special promotional interest rate that allows you to borrow money for a limited period of time — usually between 12 to 21 months. During that time, no interest accrues on your qualifying credit card balance. There are typically three types of zero introductory APR credit card offers:

1. 0% APR on balance transfers
2. 0% APR on purchases
3. Deferred interest offers

Each of these 0 percent intro APR offers could help you pay off debt faster, or avoid interest entirely as long as you pay off your full balance before the introductory period ends. Even though you aren’t charged interest on eligible balances during the introductory period, you’re still responsible for making at least the minimum payment each billing cycle. That keeps your account in good standing. But if you want to pay off the balance before the intro period ends, you’ll likely have to pay more than the minimum payment.

The two most common 0 percent intro APR offers are for new purchases and balance transfers. However, these two have a mischievous cousin called deferred interest that could be dangerous without the right precautions.

0% intro APR on balance transfers

If you want to accelerate your credit card debt payoff, you may want to consider finding a 0 percent APR balance transfer card with low or no balance transfer fees to save money. Balance transfers are often used to pay off a debt balance from other cards or loans with a higher interest rate. The best balance transfer credit cards are generally available to those with good or excellent credit.

A balance transfer credit card with a 0 percent introductory APR offer typically gives you at least a year to pay off your balance free from interest charges. However, you’ll likely have to pay a balance transfer fee, which typically ranges from 3 percent to 5 percent of the balance transfer amount. By transferring a balance from a high-interest credit card to a card with a 0 percent intro APR, you can ensure your entire monthly payment amount goes toward your original balance and not to added interest — at least while the intro APR lasts. After the 0 percent APR period ends, any remaining balance on the card will start accruing interest.

0% intro APR on new purchases

Are you planning on a large purchase soon? Some issuers offer a 0 percent introductory APR on new purchases for a limited amount of time as an incentive to sign up for a credit card. Finding the right purchase offer could help you avoid paying interest while paying the balance. For example, some of the best zero-interest APR cards come with a 0 percent APR on new purchases for the first 15 months. Focus on the card’s introductory purchase APR, standard purchase APR and how long the intro period lasts. During that time, you will only have to make payments on the principal balance on the card (the actual amount you charged) — not on additional interest.

You won’t have to worry about a balance transfer fee, but you’ll want to pay attention to details like the card’s foreign transaction fee if you’re purchasing an item from another country. Either way, be sure to learn what type of offer the card is advertising so you can plan accordingly. This is a great way to fund a large purchase or pay for an unexpected medical expense, as long as you plan to pay off your debt before the 0 percent APR offer expires.

0% intro APR vs. deferred interest

There’s an important distinction to be aware of between a 0 percent intro APR and a deferred interest offer. With a 0 percent intro APR, there are no interest charges for the introductory period — ever. The regular interest rate only kicks in on whatever outstanding balance remains at the end of the introductory APR period; there’s no secret clock running in the background adding up charges.

Deferred interest, on the other hand, delays interest payments until the end of the introductory period. If you pay off the entire balance by the end of the period, you won’t owe any interest. However, if you owe even a penny on the balance after the introductory period expires, you may owe up to 100 percent of the interest costs accrued during the deferred interest period. Plus, interest will continue to accrue on your unpaid balance as you work to pay it off.

As such, deferred interest offers are rarely a good idea unless you’re certain you will be able to pay off all of the balance before the deferred interest period expires (and you double-check there are no errant pennies owed).

How to choose a 0% APR credit card

Now that you know what a 0 percent APR card is, you’re probably wondering how to choose one. Follow these steps to choose a 0 percent APR card and make the most of it:

1. Find out what credit score you need. Most 0 percent intro offer cards require a credit score of at least 670, but some have lower credit requirements.
2. Determine what kind of offer you need. Are you making a large purchase and need time to pay it off or do you need to consolidate high-interest debt with a balance transfer? You could even tackle both goals with the right card. Knowing how you’ll use the intro APR can help you narrow your options.
3. Consider how long you need to pay it off. Most credit cards in this niche extend zero interest for at least 12 months, some cards offer 0 percent intro APRs for up to 21 months.The offer length can also help you determine an appropriate monthly payment to reach your goal before your credit card interest rate resets to the variable APR.
4. Take note of offer limitations. Read your card’s fine print to learn about the limitations associated with each card offer. Some cards will entirely rescind their 0 percent intro APR offers if you miss a single payment or don’t abide by their other rules.
5. Understand any fees involved. Late fees, balance transfer fees, annual fees and foreign transaction fees could make your card more costly to use. Be mindful of these as you read through the credit card terms.
6. Look for credit card rewards. Many credit cards with intro APR offers earn rewards, although you’ll typically sacrifice the length of your zero-interest offer for this perk.
7. Consider other cardholder perks. Make sure any credit cards you’re considering offer perks you want or could use. Pick a credit card with perks you can use in the long run — or at least one with no annual fee — so you won’t have to weigh the pros and cons of keeping the account open each year.

Not to toot our own horn, but Bankrate’s CardMatch tool is one of the best ways to find a 0 percent APR credit card. By answering a few questions, you’ll have personalized offers within seconds for the 0 percent APR credit cards that best fit your credit profile. You can also check our updated list of the best 0 percent interest credit cards for more options.

0% APR mistakes to avoid

When you take advantage of a 0 percent intro APR offer, certain mistakes could ruin the sweet deal you’ve scored and send you back to paying the regular interest rate before the promo period expires. Avoid these slip-ups on your 0 percent APR credit card:

• Missing a payment
• Making a late payment
• Waiting too long to do the balance transfer
• Overspending
• Settling with just paying the minimum payment

When you miss a payment or make a late payment on a 0 percent APR credit card, the terms of the offer likely stipulate that the issuer could nullify your promotional offer. This also happens if you don’t make at least your minimum payment each billing cycle. In some cases, it could also result in a penalty APR. If you’re using the 0 percent APR card to transfer a balance, you’ll want to make any balance transfers before the deadline to take advantage of the offer, typically 30 to 120 days after your card is issued. If you transfer the balance after that point, you’ll pay the regular interest rate.

What happens when a 0% intro APR ends?

When your 0 percent APR offer ends, your account converts to the terms outlined in your card agreement. You won’t owe any back interest — as long as there’s no deferred interest associated with your card’s offer — but you’ll begin accruing interest charges on the outstanding balance from that day forward.

Before choosing a 0 percent APR credit card or financing a purchase, it’s essential to understand the rates and fees that apply after the introductory period expires. This is particularly critical if you don’t anticipate being able to pay off the money you borrowed before the end of the promotional period.

That said, when used responsibly, a zero-interest credit card has few drawbacks. Understanding the pros and cons of 0 percent APR credit cards can help you decide if they’re a good choice for you.

Tips for maximizing zero-interest credit cards

A zero-interest credit card can be an excellent addition to your financial toolkit. However, understanding what a 0 percent APR card is and knowing how to maximize one are different challenges. Here are some tips for making the most of your zero-interest credit card:

• Pay off your balance before the promotional period ends. The best way to maximize your 0 percent APR card is to pay off your balance before the introductory period ends. That way, you’ll be able to access the credit you need without paying a penny of interest on it. It’s a win-win.
• Avoid adding new debt to a balance transfer. It might be tempting to add new debt to the card on top of your balance transfer amount and start carrying a balance, but this might keep you in debt longer. Plus, if you don’t pay off the balance before the intro period ends, you’ll pay interest on the balance and destroy what you were trying to do in the first place.
• Use your 0 percent introductory APR period wisely. Have a plan to take full advantage of your zero-interest period. Use the time to get ahead on payments and maximize your savings. Otherwise, you’re just pushing off the money you owe and not saving much.
• Avoid the temptation to overspend. Don’t use your zero-interest period as an excuse to buy more or spend money that you can’t pay back. Just because your credit card payments are lower right now doesn’t mean they will always be. Remember, once the introductory period ends, your balance accrues interest at the regular APR.

The bottom line

When you use a 0 percent intro APR offer to your advantage, you can fund a large purchase, catch up on old debt or borrow money without paying interest. When used properly, 0 percent APR offers can provide convenience, relief and an avenue to get ahead on your finances.

Of course, this benefit is not a free pass to spend frivolously or buy things that you can’t afford. If you don’t pay off your purchases or transferred balances before your 0 percent APR offer ends, you could find yourself right back where you started.

Frequently asked questions (FAQs) about 0% APR cards

• Does 0% APR mean no payments?

  Just because there’s no interest accruing on your balance doesn’t mean there are no payments. At the very least, you’re still responsible for making the minimum payment each billing cycle to keep the account in good standing. If you miss a payment on a 0 percent APR credit card, you risk an early end to your promotional rate, late fees and even a penalty APR in some cases. And if you want to use your 0 percent APR card to pay off a large purchase or balance before the end of the promotional period, then you’ll have to pay more than the minimum.

• Is it better to have 0% intro APR or no annual fee?

  Ideally, you’d try to find a card with both. But if you have to choose between 0 percent intro APR and an annual fee, then you may want to go with zero percent APR. This choice stands to save you more money on interest over the introductory period compared to the cost of a typical annual fee.

  For example, let’s say you’re paying off a $3,000 purchase over 12 months with a 0 percent APR card that has a $95 annual fee. The standard variable rate for the card is the same as the current average credit card interest rate at the time of writing: 20.35 percent. According to Bankrate’s debt payoff calculator, the 0 percent intro APR offer saves you $278 in interest during the introductory period, which outweighs the $95 annual fee. So even with the cost of the annual fee, you’d save $183 by using your card’s 0 percent intro APR offer.

• What’s the catch with 0% APR offers?

  If you’re paying attention to the terms of 0 percent intro APR offer, then there isn’t really a catch. If you stick to a plan that allows you to repay the balance before the intro period ends, then you’ll avoid paying any interest. That’s a win. A catch only comes into play when you don’t know how to use these offers to your advantage.

  Oftentimes, the variable APR that applies after the introductory period ends could be higher than what you were paying before. There may also be a temptation to spend beyond your means since interest isn’t applied during the promotion. And one late or missed payment could derail your plans of avoiding interest charges.