How Do 0% Intro APR Credit Cards Work?

How Do 0% Intro APR Credit Cards Work? article image.

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While credit cards and high interest rates often go hand in hand, that's not always the case. You can use a promotional 0% annual percentage rate (APR) offer on a credit card to pay down debts or make purchases and avoid interest altogether. But be sure you understand how the promotions work, and have a plan to pay off the balance before the promotional period ends. Here's all you need to know.

How 0% Intro APR on Balance Transfers Works

Credit cards that offer a promotional 0% APR on balance transfers allow you to move debt to the card and then pay it off over time without accruing interest.

Generally, only balance transfers that you request or that are completed (a potentially important distinction you should look for in the terms) within a certain period will qualify for the promotional rate. For example, the 0% APR may only apply to balances transferred within 60 days of opening your account.

Once you let your new card issuer know which balances you'd like to transfer to the new card, the issuer will either pay off those balances or issue you a check so you can do so yourself.

The transferred balances will receive a 0% APR rate for a promotional period, which typically lasts nine to 21 months, depending on the card and offer. If you pay down the balance in full by the end of the period, you won't pay any interest on that balance.

Many cards also charge a balance transfer fee, which is often 3% to 5% of the amount you transfer. Compare how much you'll spend on fees with how much you could save on interest to determine whether using a balance transfer offer is a good idea.

How 0% Intro APR on New Purchases Works

In addition to a promotional 0% APR offer on transfers, some cards offer a promotional interest-free period on purchases as well. During that period your purchases won't accrue interest as long as you're making the minimum monthly payments on time. Your 0% APR offer on purchases may not be for the same length of time as on balance transfers, so check the card's terms carefully.

If you're planning on making a large purchase or have a lot of expenses coming up, a 0% APR on purchases could let you pay down the balance over time without paying interest. It may even be a better option than taking out a personal loan with a low interest rate if you're certain you can pay off the balance before the end of the promotional period.

As with a balance transfer, any balance that remains in your account after the promotional period ends will begin to accrue interest at your standard purchase APR.

What Credit Score Qualifies for 0% Intro APR?

You can find many credit cards with a 0% intro APR balance transfer or purchase offer, and there isn't a specific credit score that you'll need to get approved. But generally, you'll want to have a good to excellent credit score before applying.

Card issuers may determine your credit limit after considering your credit score, income, monthly bills, history with the issuer and credit limits on other cards. If you have poor credit, you might get approved for a card with a low credit limit that won't cover many balance transfers or purchases.

How to Use 0% Intro APR Offers Wisely

When used correctly, a 0% APR offer can save you a lot of money. But here are a few things to be aware of before proceeding.

Have a Plan

Calculate the monthly payment you'll need to make in order to pay off the balance before the promotional period ends. You may want to give yourself a little extra room in case finances get tight by calculating using a timeframe that's a month or two shorter than the actual promotional period.

Also, be sure to make at least the minimum payment each month. Otherwise, the card issuer may be able to end your promotional rate early.

Don't Apply for Cards From the Same Issuer

Generally, you can't transfer balances between two cards from the same issuer. For example, if you currently have balances on American Express, Chase and Discover credit cards that you want to transfer, you may want to look for a balance transfer card from Citi.

Know That Credit Cards Can Have Multiple Types of Balances

Your purchases, balance transfers and cash advances may have different interest rates and promotions. Even if you receive a 0% APR offer on balance transfers, that might not apply to your purchases with the card—and vice versa. Similarly, promotional 0% APR offers for both balance transfers and purchases generally don't apply to cash advances.

If you use a card that only offers an intro 0% APR on balance transfers, your purchases or cash advances may start to accrue interest right away. Generally, when you make a payment, the amount that's equal to your minimum payment is applied to the promotional 0% APR balance and the remainder goes to your highest APR balance. If you're not careful, you could wind up mistakenly carrying an interest-bearing purchase or cash advance balance.

Understand the Fees and Fine Print

Read the cardholder agreement and look for balance transfer fees, what happens when you miss a payment and how the card issuer will apply your payments to your balances. Some issuers may also have a limit on how much you can transfer to the card, which may be lower than your card's credit limit.

Consider the Impact on Your Credit

Learn about how opening a card, using your card and transferring balances can impact your credit scores. Generally, applying for a card can lead to a slight drop in your score, and carrying a high balance can also hurt your score—even if that balance doesn't accrue interest.

A new credit card will also add to your available credit, however, which could improve your score if it lowers your credit utilization ratio, or amount of available credit you're using. Credit utilization is the second most important factor in your credit score calculation (next to payment history, so make sure all your payments are on time). If avoiding interest helps you pay down more of your balance, that could be beneficial for both your credit scores and financial situation overall.

Look Into 0% Intro APR Credit Cards

A credit card that offers a 0% APR promotion on both balance transfers and purchases may give you the flexibility you need:

Chase Freedom Unlimited®

The Chase Freedom Unlimited® gives you a 15-month promotional period with 0% APR on purchases and balance transfers (after which will be 17.24% to 25.99% variable APR). The card offers 5% cash back on travel purchased through Chase Ultimate Rewards®, 3% cash back on drugstore purchases and dining at restaurants, including takeout and eligible delivery service and 1.5% cash back on all other purchases. If you're a new cardholder you can earn an additional 1.5% cash back on everything you buy (on up to $20,000 spent in the first year) - worth up to $300 cash back! For balance transfers, cardholders will pay an ongoing balance transfer fee of either $5 or 5% of the amount of each transfer, whichever is greater. There's no annual fee for the card.

To explore more offers, you can visit the Experian CreditMatchTM tool and filter the results based on your credit, 0% intro APR offers, no annual fee, rewards and more.

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