What's the downside to paying just the minimum amount on a 0% APR credit card?

There are no downsides to paying the minimum on a 0% APR card, but make sure you pay off your debt before the 0% period ends, to avoid interest charges on the remaining balance.

You will never have to pay interest on a credit card so long as you pay off your balance by the end of your grace period.

Hi! This is a great question. You are in an enviable situation in that you HAVE the money to pay off your credit card debt that charges no interest for a time. You are correct in saying that you need to make sure that you make the monthly payment each month on time – if you are late or don’t pay, you could get hit with interest charges and penalties – be sure to know what the rules are. It sounds like you really have it all together and are unlikely to miss or pay a minimum payment late, but mistakes and oversights do happen even with the most careful people, so you want to keep on top of the payments.

Another consideration is if misfortune strikes sometime between now and the time when the 0% interest period ends. If at that point you no longer have $4000 to pay the balance off, you may get hit with high rates going forward and penalties. It could also be that you have the money but get confused on the dates and don’t pay off on time. Once I went to pay a credit card bill online and I paid it at 3:30 pm not realizing that after 3 pm for that card meant the money was credited the next day. I was charged a late fee that I was unsuccessful in negotiating away. I now pay things a full day before they are due or sooner! Once bitten, twice shy!

A third potential problem is that some charges may not be part of the 0% deal. Clair Tsosie explains: “To find out how much you’ll pay in other situations, you’ll have to read what’s known as the Schumer box, a black-and-white table typically included in credit card offers. These are a few of the different APRs sometimes listed in the Schumer box that may not be covered by a 0% APR offer: Balance transfer APR: If you transfer a balance from another card to a 0% APR card, you’ll typically have to pay a separate interest rate on that in addition to a balance transfer fee. Cash advance APR: Generally, you have to pay a much higher APR for cash advances than other types of transactions, along with a fee. Penalty APR: If your good credit card habits fall by the wayside, you might find yourself stuck with a sky-high penalty APR. Actions that might trigger this include making no minimum payment within 60 days, exceeding your credit limit or making a payment that doesn’t go through.”

A fourth concern is that having debt could temporarily push your credit score/ FICO score down. If you aren’t needing to borrow and aren’t looking for jobs or in the hunt for other things or activities where your credit score matters, that may not be a problem. But it is worth considering.

So in conclusion, it could be a great way to let your $4000 work for you in a CD or other interest bearing situation – you just want to be sure not to make a mistake and end up paying more than you make. Best wishes and thanks for writing!