How do 0% APR credit cards work, and will one work for you?

However, it’s important to remember that 0% APR credit cards aren’t a perfect fit for everyone. And even if you decide to move forward with an application, some 0% APR credit cards may be better than others.

The guide below will help you understand how 0% credit cards work. You’ll also discover key details to keep in mind when shopping for this type of credit card offer.

1. The 0% APR only applies to certain transactions

Depending on the offer, the 0% APR promotion on a new credit card might apply to the interest rate on new purchases, balance transfers, or both. It’s important to read the fine print to find out the APR you’ll pay in each situation so there are no surprises after you open a new account. In general, cash advances do not qualify for interest-free promotions and you typically have to pay a fee for these types of transactions as well. 

2. The 0% APR period may vary based on transaction type

Some credit cards may offer a 0% APR promotions on multiple types of transactions, such as balance transfers and new purchases. Yet even if the 0% APR applies to purchases and balance transfers, the length of the interest-free period could vary depending on the transaction type. 

The Citi Simplicity® Card, for example, offers new cardholders an introductory 0% APR period for 12 months on new purchases. Afterwards, a 19.24%-29.99% variable APR applies. Yet the same card features a longer 21-month 0% intro APR period on balance transfers. Once the intro period ends, a 19.24%-29.99% variable APR will apply. 

3. Some card issuers offer longer interest-free periods than others

If you’re searching for a 0% APR credit card, there’s a good chance you want to take advantage of the interest-free financing period for as long as possible. A lengthy interest-free period could help you save more money if you’re trying to pay down debt with a balance transfer. And if you’re using a 0% APR credit card to finance a large purchase or cover an emergency expense, a longer interest-free period might work in your favor as well. 

For this reason, it’s smart to shop around and compare offers before applying for a new credit card. Not all 0% APR credit cards are equal. Some credit card issuers may offer more generous interest-free periods than others. Finding the longest 0% APR offer possible could be beneficial if you need extra time to pay down debt and avoid higher interest charges. 

4. Additional fees may apply for balance transfers

It’s also important to understand that 0% APR credit cards often feature balance transfer fees. If you want to move debt from an existing credit card to a new account, you’ll usually pay an additional cost to do so. 

Again, all balance transfer fees aren’t created equal. Many balance transfer fees range between 3% to 5% of the amount you transfer to your new credit card. So, if you’re trying to consolidate debt and you shop around to find a 0% APR credit card offer that features a lower balance transfer fee, it could save you money.  

For example, if you transferred $15,000 to a 0% APR credit card with a 5% balance transfer fee, it would cost you $750. But if you found a 0% APR credit card offer with a 3% balance transfer fee, you could transfer the same amount of debt ($15,000) for just $450 instead. 

5. You may have a limited time to initiate balance transfers

Another detail to consider is that you may need to move quickly if you want to take advantage of a 0% intro APR on balance transfers. Some credit card companies only allow a limited amount of time to complete your balance transfer after you open a new account. 

Consider the BankAmericard® Credit Card as an example. The card features a 0% intro APR for 18 billing cycles for purchases and balance transfers (plus a balance transfer fee of 3% of the amount of each transaction). However, you must complete any balance transfers within the first 60 days of opening your account to be eligible for the offer. After the 0% introductory APR period ends, the regular APR on the account will be 16.24%-26.24% thereafter. 

6. A high balance could still hurt your credit score

A 0% APR credit card offer has the potential to save you money when you manage it in a responsible manner. Nonetheless, even if you pay your credit card on time, the account could hurt your credit score if your credit report shows you have a high balance on the account. 

A high credit card balance in relation to your credit limit may increase your credit utilization ratio. Credit utilization, the percentage of your credit limit in use, is a major factor that influences your credit score. Until you’re able to pay down your credit card balance and decrease your credit utilization ratio by extension, the new 0% APR credit card you opened to finance large purchases could possibly have a negative impact on your credit score. 

Of course, no two situations are the same. If you opened a credit card to consolidate existing credit card debt, the new account might have the effect of reducing your overall credit utilization ratio. When a new 0% APR credit card triggers a drop in your credit utilization ratio, the account might improve your credit score instead. 

7. You might not qualify for a 0% APR credit card

Before you can open a 0% APR credit card, you’ll need to satisfy a credit card issuer’s qualification requirements. Card issuers typically like you to have at least a good credit score—often 670 or higher—to be eligible for this type of credit card offer. If you have a very good FICO Score (740-799) or an exceptional FICO Score (800-850), your approval odds may be higher. 

If you’re not able to meet the criteria to qualify for a 0% APR credit card yet, consider working on building your credit for the future. Positive actions like paying down existing credit card debt might also work in your favor as you try to improve your credit.  

8. You could lose your 0% APR promotion

As with any credit card account, paying your bill on time each month is best. If you make your payment late, you risk losing the 0% promotion and triggering an early reset to the regular APR on your account.

Furthermore, missing your due date by even one day could result in your card issuer charging you a late fee. And if you fall a full 30 days behind on your payment, your credit card company could report you as late to the credit bureaus—Equifax, TransUnion, and Experian. When a late payment shows up on your credit report, it can remain there for up to seven years and could damage your credit score. 

9. Leftover balances incur interest

Credit cards with 0% introductory APRs don’t offer interest-free financing forever. In general, the promotional interest rates on these accounts tend to reset to the standard APRs after 21 months or less. 

When the 0% APR period ends on your credit card, any remaining balance on your account will start to accrue interest at the regular account APR. Because the average credit card interest rate tends to be high (often over 20%), carrying a leftover balance after the interest-free period can quickly offset any savings you received. Therefore, it’s important to create a plan to pay off your full balance before the 0% APR period expires. 

Bottom line

Getting the most benefit from a 0% APR credit card requires careful planning—both before and after you apply for a new account. Not only do you need to understand how these interest-free offers work, but you should also plan ahead to pay off your debt before the 0% APR period expires to save the most money possible. It’s also wise to shop around to make sure you find the best 0% APR credit card offer for you. The best 0% APR credit cards should feature a combination of lengthy interest-free periods, low balance transfer fees (if you’re interested in a balance transfer), and other benefits that may be a good fit for your specific needs. 

Please note that card details are accurate as of the publish date, but are subject to change at any time at the discretion of the issuer. Please contact the card issuer to verify rates, fees, and benefits before applying.