A 0% APR (also known as zero interest) means that you pay no interest on new purchases and/or balance transfers for a certain period of time. The best 0% APR credit cards give 15-21 months without interest. But the average 0% APR intro period is about 12 months for cards offering 0% purchases. And it’s around 13 months for the average card with 0% on transfers.
A 0% APR does not keep you away from monthly payments, nor does it completely remove interest out of the equation. You still have to make monthly minimum payments to keep your 0% APR. And if you don’t pay off your balance by the end of the 0% intro period, you’ll have to pay interest on whatever balance remains. The penalty is even worse with many retailers’ 0% financing offers. If you don’t pay off your full balance in time, interest will retroactively apply to your entire original balance – as if the 0% APR was never there.
There are a few other things you should keep in mind when thinking about 0% APRs, too.
0% APR Key Takeaways
You pay no interest on your purchases and/or balance transfers for the duration of the introductory APR period, which depends on the card.
0% APRs make debt cheaper to pay off, which helps you get out of debt faster.
A 0% APR does not free you from the responsibility of making monthly payments. You must pay at least your monthly minimum to avoid being classified as late. Late payments damage your credit score.
0% credit cards tend to have fairly high regular APRs. So, you should strive to bring your balance to zero by the end of the 0% APR period, when regular rates take effect.
It’s also important to note that you won’t only find 0% APRs on credit cards. You may see auto loans with them, for example. Just be sure to always read the terms in detail before signing. You don’t want to end up with deferred interest instead of a true 0% APR.
How much you owe can also determine your minimum payment on a 0% APR credit card. The 1% or 2% rate usually applies if you have a sizeable balance, generally $1,000 or more. If your balance is less than the $1,000, you’ll pay a fixed floor rate, usually around $25 for minimum payments. The fixed rate varies by card. If you have a very small balance, less than $25, for example, your minimum payment will be the full balance.
There are other factors that can affect the minimum payment on a 0% APR credit card. If you pay late or exceed your credit limit, for example, your minimum payment will be adjusted. It will include any unpaid minimum payment, amount over the credit limit and related fees. If these occur during the 0% APR period, an issuer may also cancel the 0% interest rate and begin charging the regular APR.
Here is what you should know about the minimum payment on 0% APR credit card:
A minimum credit card payment is the lowest amount you’re obligated to pay each billing cycle in order to keep your account current.
Most major credit card issuers require a minimum payment equal to 1% of the total balance. Discover charges 2%.
When a 0% APR period expires, minimum payments will increase to include any interest charges added to the total balance since your last billing cycle.
You can find your minimum payment on your credit card statement. It is also available on your online account or in the introductory pamphlet included with your new card. You can also call customer service at the number on the back of your card to inquire.
Minimum payments can be determined by how much you owe. The 1% - 2% rate usually applies to higher balances ($1,000 and more). A minimum payment floor (usually around $25) often applies to balances less than $1,000.
Usually, if you have a balance of less than $25, the full balance is the minimum payment.
An issuer may also cancel the 0% interest rate and begin charging the regular APR if you pay late, exceed your credit limit or fail to make the minimum payment. Your minimum payment will be adjusted to include any outstanding minimum payment, over limit amounts or any related fees.
Don’t assume that a 0% APR means you don’t have to pay anything at all. You are required to pay the minimum every month; you just won’t owe interest during the 0% period. And you should always try to pay significantly more than the minimum amount due on a 0% APR credit card. You want to pay off the entire debt before the introductory rate expires and the regular APR kicks in. Any missed payments or payments less than the minimum amount will likely lead to the 0% APR being cancelled.
If you’re transferring a balance or financing a big purchase, divide the balance by the number of months the 0% promotion lasts. This will help you get a rough estimate of how much you should pay each month. Better still, divide the balance by one less month than you have on your promotion to make absolutely sure no balance remains at the end.
When a 0% APR period ends, the credit card’s regular APR will kick in. That rate will apply to any unpaid balance remaining on the credit card as well as any new purchases made from that point on. The regular APR that applies when a 0% APR period expires tends to be very high, so it’s best not to leave much of a balance for it to affect.… read full answer
The only exception to this rule is a 0% interest period with a feature called deferred interest. General-purpose 0% credit cards don’t have it, but some store credit cards do. This isn’t a true 0% APR deal because the interest is still accruing while it’s “deferred,” and it will apply if you don’t pay your balance on schedule. So when the 0% APR ends on a deferred interest financing offer, you’ll be charged interest on the original purchase amount, as accrued from the purchase date, if you have even $1 of your original balance left to pay. Your deferred interest could also return prematurely if you make a late payment, and it’ll likely be a lot more expensive than a late fee. That’s why it’s very important to make on-time payments on deferred interest credit cards, and to pay off the balance before a deferred interest period is over.
Even though a credit card with a true 0% APR period won’t retroactively charge interest on purchases, be smart with these cards. Interest will apply to any balance remaining when the 0% period ends, so plan out your payments to ensure there’s little left at that point. Using a credit card payoff calculator can be a big help.
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