0% APR Credit Cards

The best way to use a 0% 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 17.86% regular APR, according to WalletHub’s latest Credit Card Landscape Report.

As a result, 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.

Many people assume credit cards with 0% APRs are always around. But they’re actually just limited-time offers. They tend to be plentiful when the economy is strong and scarce when credit card companies believe the risk of nonpayment is too high.

That’s why it’s best to act as if another 0% card will not be available to bail you out. It’s also why you should consider a 0% card’s regular APR if there’s a chance you won’t be debt-free by the end of the intro period. You never really know when the economic tides or issuer policies will shift, after all. And a lot of 0% credit card users learned a costly lesson about not planning for the worst during the Great Recession.

It’s also worth noting that even when 0% APR credit cards are available, their terms still fluctuate over time. For example, the average 0% credit card offer had a 7.29-month intro period at the end of 2010. And that grew to 10.27 months in Q3 2013, before dipping to 9.85 months at the end of 2016. So getting the best 0% credit card deal is part good timing and part opportunism.

Credit card companies generally make money off of fees and interest. So it’s understandably confusing that they would sacrifice the interest part of the equation, if only for a limited time, especially since most 0% cards don’t charge annual fees. But there are three main reasons why banks and credit unions offer 0% APR credit cards:

1. To entice new customers. Zero percent intro rates are eye-catching, and banks can market their other products to new cardholders in order to make money.
2. To encourage more spending. Credit card companies make money from so-called interchange fees every time you make a purchase. And the more debt you rack up, the less likely you are to repay your full balance within the 0% term.
3. To make money from interest. This might seem a bit counterintuitive, but issuers know that many people will carry a balance for longer than their 0% intro rate is available. And that’s when they hit you with a high regular APR. The current average is 17.86%. In other words, credit cards with no interest whatsoever don’t actually exist.

These reasons also help to explain why credit cards don’t have permanent 0% rates. And the fact that issuers offer 0% APRs to make money, not just out of the goodness of their hearts, is why you should always be on the lookout for hidden costs and deals that seem too good to be true.

“If consumers actually routinely borrowed at 0% without paying any fees or interest, it would be difficult for credit card companies to earn a profit on these deals,” said Michael Simkovic, an associate professor at the Seton Hall University School of Law who studies the credit regulations. “Customers just really have to read the fine print, compare the total cost of borrowing the amount they need for the time they need it (including interest and fees) and be very, very careful.”

Believe it or not, 0% APR credit cards aren’t for everyone. In fact, there are three main situations in which using a 0% card is probably a bad idea.

1. If you always pay your monthly bill in full. You’ll save more money with one of the market’s best rewards credit cards if you don’t plan to carry a balance from month to month. And even if you do need a 0% credit card for big-ticket purchases that will take longer than a month to repay, you should still have a rewards card for everyday spending.
2. If you’ll spend more than you would otherwise. Spending can easily get out of hand without interest to worry about. But remember, you have to pay your full balance at some point. And if you do spend more than you can afford to repay before regular rates take effect, interest charges will quickly erase any prior savings.
3. If it’s a 0% store credit card. All of the major store credit cards with 0% intro rates use a dangerous feature called deferred interest, according to a 2016 WalletHub study. Deferred interest means that if you’re late with a monthly bill payment or you fail to repay your full balance during the 0% intro period, interest will retroactively apply to your entire original purchase amount at the card’s regular rate – like the 0% offer never existed.

Finally, it’s worth noting that you might not even be able to get a 0% credit card if you have fair, limited or bad credit. So checking your credit score for free on WalletHub is one of the steps in determining whether a 0% APR is in the cards.

A 0% APR on a credit card means you won’t have to pay interest – on new purchases or balance transfers, as the case may be – for a certain period of time. That intro period is just under 10 months for the average card offering a 0% APR on purchases. And it’s about 11.5 months for the average card with 0% on transfers.

A 0% credit card does not, however, free you from the responsibility of making monthly payments. You must pay at least the monthly minimum to avoid being classified as late, which would damage your credit score. And you have to bring your balance to zero by the time regular rates take effect if you don’t want to see your 0% savings go up in smoke. Zero percent credit cards tend to have fairly high regular APRs.

Finally, not all 0% interest credit cards are as friendly as others. In particular, you need to watch out for those affiliated with a specific retailer. When major retailers offer 0% financing, they generally use a feature called deferred interest. It basically allows them to retroactively assess interest (at the regular rate) to your entire original purchase amount if you pay your bill late or leave a penny balance unpaid at the end of the intro period. So it’s best to avoid store-card financing.