How can credit card companies offer 0% APR?

The best way to use a 0% APR credit card is with a clear plan. Interest-free credit cards aren’t always available. So, you can’t just assume that you’ll be able to transfer whatever balance remains at the end of your new card’s 0% intro term to yet another 0% credit card. And exposing much of a balance to a card’s regular interest rate is a costly proposition. The average 0% credit card has a 18% regular APR, according to WalletHub’s latest ... read full answerCredit Card Landscape Report.

Here’s the best way to use a 0% APR credit card:

The first thing to keep in mind is that using a 0% card correctly starts with calculating how long it will take you to repay your debt (without interest). This will tell you how long of a 0% intro period you’ll need and how important each card’s regular APR will be.

The second step is to check your latest credit score, which you can do for free on WalletHub. This will tell you which, if any, zero-interest credit card you can qualify for.

Next, you’ll need to compare whatever eligible offers remain. In doing so, consider all of the various account terms that could affect your overall financing costs. That includes the length of the 0% period, the annual fee, the regular APR and if you’re trying to reduce the cost of existing debt, the balance-transfer fee. And WalletHub’s Credit Card Payoff and Balance Transfer calculators are perfect for the task.

After you find the best 0% APR card for your needs, submit an application and, hopefully, get approved, your focus should shift to making on-time monthly payments and reaching debt freedom as quickly as possible. And the best way to accomplish those goals is to set up automatic monthly payments for your budgeted amount.

You could save hundreds or even thousands of dollars with a credit card’s 0% intro APR offer. This is true for 0% APR offers on both balance transfers and new purchases, though the exact amount you’ll save depends on the amount you’re paying off and how much you can afford to pay each month.... read full answer

The tables below use average credit card interest rates, fees, and intro periods to show how much you could save when repaying a debt over the course of three years.

Potential Savings with a 0% APR Offer for New Purchases

Potential Savings with a 0% APR Offer for Balance Transfers

Note: Finance charges assume a 3% balance transfer fee.

Find Out How Much You Could Save

To figure out if a 0% intro rate credit card would save you money, use WalletHub’s credit card calculator. And if applying for a new card seems like the right move, check out our top 0% APR picks for 2023.

A 0% APR credit card won’t hurt your credit score more than other types of credit cards would. Opening a new credit card – whether it’s a 0% APR card or a rewards card, for example – will cause a small credit-score drop, due to the hard inquiry required by most credit card companies when evaluating an application. A 0% APR card won’t hurt your credit simply by existing on your credit report, though, assuming the card is used responsibly.... read full answer

If you use a 0% credit card to spend more than you can afford to repay before the card's regular interest rate takes effect, you may be charged a lot of money in interest. Even if you then transfer a high-interest balance to a 0% APR credit card, you will likely have to pay a balance transfer fee. You can learn more about the potential downsides of 0% APR credit cards below.

How a 0% APR Credit Card Could Hurt Your Credit

• Overspending. A 0% introductory period makes it easier to rack up a bigger bill than you’d planned on or can manage. No interest means there’s less pressure to pay off your balance in full every month, too.
• Missed payments. If your 0% APR period turns into a high regular APR when you’re carrying a large balance, it could quickly become unaffordable. And if you’re unable to make the minimum payments, your credit score will definitely take a hit.
• High credit utilization. Many people get a 0% APR credit card to pay off a large purchase over time without paying interest. That’s a good use of a 0% APR period. But if the purchase takes up most or all of the card’s credit limit, the cardholder’s credit utilization will go up. High credit utilization could damage your credit score.

It is worth noting that if you won’t need your credit score for anything important for a while, temporarily high credit utilization is better than paying a lot in interest. Also, don’t worry about negative remarks on your credit report just because you aren’t paying interest—there’s no truth to that claim.

Ultimately, if you’re considering getting a new credit card for its 0% APR period, the best things you can do to minimize the chances of hurting your credit are to always make payments on time and avoid maxing out your credit limit. Also, it’s not a bad idea to set spending boundaries beforehand to avoid paying the regular interest rate after the promotional period expires.