Choosing 0% APR Credit Cards Wisely

Editorial Note:

0% APR credit cards are powerful tools to help reduce credit card debt. They allow you to pay off the principal of the debt without accruing interest over a given period of time. This 0% APR offer may apply to new purchases, past balance transfers, or both. If you are looking for 0% APR credit cards, you should know not all cards are created equally. You should choose a card that helps your financial goals.

What Is Your Goal?

You may have different factors to consider depending on if you’re making a large purchase or attempting to eliminate debt. Sometimes, the conditions are just right for purchasing that big value item that you were planning to make. Then, the purpose of your 0% APR credit card is to reduce the financing cost of a new big purchase. For these cards consider the type of credit card, promotional period length, and post promotional APR, among other things.

If your intention is to eliminate debt then you should consider a 0% APR balance transfer credit card. With this card, you can transfer credit card debt from another card issuer and take advantage of a lower interest rate. Be aware that a balance transfer card usually comes with a fee equal to 3-5% of the debt transferred. You may want to search for a card that waives this charge. There is a possibility that this expense may end up eliminating any savings that the low interest rate may provide.

Pro tip: Be very careful not to confuse a deferred interest card for a 0% introductory APR card. A deferred interest card incurs interest during the introductory period. This interest is added to the first payment after the deferred interest period ends. A 0% introductory card will not generate any interest at all. This will be true as long as the terms of the credit card agreement are met. At the end of the introductory period, there will be no deferred interest that must be paid.

0% APR on Purchases

Additional Factors

Once you have determined the purpose for your 0% APR credit card, there are other features you should consider. These are listed below.

  • Promotional period. The length of your promotional period varies between the card issuers. It can be as short as six months, or as long as 21 months. Choose a card with an introductory period long enough to pay off your debts completely in equally divided payments. Depending on your debt and the state of your finances, you will know how much time you need.
  • Post-promotional APR. Once the 0% APR expires, you should be comfortable with the regular APR of your card. This is especially important if you are unable to pay off your debt balance before the introductory APR expires. Select a card with a low non-promotional APR to help you manage any remaining debt and new purchases going forward.
  • Annual fees. The card you selected may or may not come with a yearly fee. We recommend that you review the card benefits, the annual expense, and any other fees applicable to the account. Only then can you determine if the card is worth the cost.
  • Other card benefits. 0% APR credit cards may come with other bonuses. These may include cash back offers, travel extras, or other perks. When reviewing credit card benefits, read all the terms and conditions. This is to ensure that you can reasonably access the extras offered on the card. You want to ensure that the requirements to access these perks fit your spending behavior without incurring any excess debt. For example, a card offering 100,000 travel points sounds like a must-have card. That may be enough points for you and a guest to fly business class on your next trip.  It sounds less appealing if, in order to get this, you must spend $10,000 within the first three months.

Be Wise in Your Choice

If you decide that you do need a new credit card, 0% APR credit cards may be a good way to go. The type of card you ultimately select will be a function of its purpose, post promotional behavior, and other benefits. Remember to review your card holistically, and not have tunnel vision on one particular feature. Don’t forget to read the card’s fine print before making a selection. You want to ensure that the card you select works for you and not the other way around.

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