The best 0% APR credit cards let you avoid paying interest on purchases or balance transfers for a certain number of months after you open the account. While these cards can save you a lot of money, there are a few mistakes consumers make with 0% APR credit cards that end up costing them money instead.
1. Not Checking Minimum Credit Score Requirements
Most of the best 0% APR credit cards require at least good credit for approval, and some require excellent credit. It’s very important to check your credit score before you apply for any card to make sure you at least meet the lender’s minimum. If you apply and are rejected because you fail to meet the minimum score required, you will have taken a hit to your credit score for nothing.
If you’re able to, you should also get pre-approved for a card before applying. If you’re pre-approved, you’re still not guaranteed to get the card, but your odds are as high as they can be.
2. Thinking Low-Interest Promotions Last Forever
No credit card offers a 0% APR that lasts forever – it’s always an introductory rate. The average length of a 0% APR promotion for purchases is 11 months, and for balance transfers it’s 13 months. Once the introductory period expires, any remaining and new balances will be subject to the card’s regular APR.
The average regular APR for cards that offer a 0% introductory APR on purchases is 17.58%. For cards that offer a 0% introductory APR on balance transfers, it’s 17.31%.
3. Not Paying Off Your Balance by the End of the 0% Intro Period
The purpose of using a 0% APR credit card is to save money. If you don’t pay off your balance by the end of the intro period, it will begin accruing interest. Therefore, it’s best for your wallet to have a $0 balance when the 0% APR expires.
Before you transfer a balance to your new card or make any big-ticket purchases, you should make a plan for how much you need to pay every month in order to have a $0 balance by the end of the introductory period. A credit card calculator can help.
4. Assuming a Decent Balance Transfer Card Will Always Be There to Bail You Out
There are quite a few good balance transfer credit cards on the market right now, but there may not always be a worthwhile deal that you can qualify for exactly when you need it. Instead of racking up balances on your credit cards with the plan to move them to a balance transfer credit card later, you should plan as if high regular rates are only months away. It will force you to put yourself in a less precarious financial position.
5. Making New Purchases With a Card After Transferring a Balance
When you transfer a balance to a credit card and carry it between months, you won’t accrue interest on it if you have an introductory 0% APR on balance transfers. But you will accrue interest on any new purchases you make, because anytime you carry a balance from month to month, you lose your grace period. Typically, you must pay your credit card balance in full for two consecutive months in order to regain your grace period.
The exception is if you have a card that has an introductory 0% APR on both balance transfers and regular purchases. In that case, you won’t accrue interest on either type of balance until those 0% periods expire. But it’s also not a great idea to make a lot of purchases and rack up additional debt while you’re still working to pay down your existing debt.
6. Using a 0% APR Credit Card for Everyday Purchases
The ideal things to use a 0% APR credit card for are paying down existing debts through a balance transfer or financing big-ticket items that you’re unable to pay for all at once. There’s no point to using a 0% APR credit card just for smaller, everyday purchases like gas and groceries that you’d typically pay off every month.
Using a 0% APR credit card for small everyday expenses can actually make it harder to tell if you’re overspending until it’s too late and the 0% period is about to expire. You’d benefit much more by using a rewards card that helps you recoup some of what you spend on everyday purchases.