Pros and Cons of 0% APR Credit Cards


  • If you're strict about how you use your card, a 0% APR card can help you consolidate and pay off debt faster without paying interest.

  • These cards often charge balance transfer fees, and if you're late on a payment, you could lose out on the 0% APR.

  • If you are unable to repay the transferred amount before the end of the introductory period, you will pay higher interest on the remaining balance.

The ability of any credit card to have a positive impact on your finances depends on how you use it. A 0% introductory annual percentage rate (APR) or balance transfer card can be a godsend if you make the right moves. If not, you may regret signing up for years to come.

Before comparing and choosing a 0% APR credit card, it helps to understand the potential advantages and disadvantages of these cards. Not only will this help you decide which new card to buy, but arming yourself with information can help you avoid ending up with more debt than you started with.

Advantages of 0% APR Credit Cards

The main benefit of a 0% introductory APR credit card is obvious – avoiding interest. However, other potential benefits are more subtle. Consider these benefits before applying for a zero-interest credit card.

Save interest

This shouldn't surprise you, but a 0% APR credit card can help you save a lot on interest. That's true regardless, but it's especially true if your alternative is a traditional credit card, considering the average interest rate on credit cards right now is over 20%.

How much money can you save? Let's say you have $4,000 in credit card debt with an annual interest rate of 20%. You decide you can comfortably afford $200 per month. In this case, it would take you 25 months to become debt-free. Even worse, you'll pay $906 in interest along the way.

Now consider an introductory card with a 0% APR: If you paid $200 per month on such a card, you could be debt-free in 20 months and pay $0 in interest. Assume your introductory offer lasts for at least 20 months, which is in line with some of the best offers currently available.

For example, the Wells Fargo Reflect® Card offers 0% intro APR for 21 months, starting with your opening purchase and qualifying balance transfers made within the first 120 days. After introductory APR offer ends, variable APR of 18.24%, 24.74% or 29.99% applies. All balance transfers are subject to a 5% balance transfer fee (minimum fee is $5).

Consider using Bankrate's Balance Transfer Calculator to enter your balance and interest rate to see how much you could save with a 0% APR introductory card.

Lower monthly payments

While saving money on interest may be your goal, switching from a higher interest rate to a 0% APR can also lower your required monthly credit card payments.

But remember, your credit card's APR will be calculated at the card's regular rate after your APR introductory period ends. In other words, your lower monthly payments may not last long.

Pay off debt faster

Using a balance transfer credit card to pay zero interest on consolidated debt can help you pay off debt faster.

There are no interest charges added to your bill each month, and every penny you pay is applied directly to your principal balance.

Enjoy consumer benefits and rewards

As an added bonus, some credit cards with 0% APR also allow you to earn rewards on your purchases. This can include welcome offers and cash back or bonus points based on every dollar you spend.

Credit cards also offer valuable benefits and consumer protections, including cell phone insurance, purchase protection against damage or theft, and extended warranties.

Improve your credit score

Finally, using any credit card responsibly can help improve your credit score. Paying down debt can help improve your score because it lowers your credit utilization ratio, and making card payments on time is the most important factor in determining your FICO credit score.

Disadvantages of 0% APR Credit Cards

While there are many benefits to 0% APR credit cards worth considering, using your card in the wrong way could cost you money. Here are the biggest potential disadvantages of using this type of credit card.

Late payments can derail your plans

First, understand that making a late payment on a 0% introductory APR credit card may result in the loss of the card's introductory APR. This is because late payments usually breach the terms of the introductory offer. If you're late or miss a payment, you might even end up paying a penalty that's higher than the card's standard variable APR.

A new credit card may temporarily affect your credit score

Applying for a new credit card will result in a hard inquiry on your credit report, which may lower your credit score. But remember, the effects are temporary and minor. Unless you need to keep your credit in tip-top shape because you're about to apply for a loan, you don't have to worry about a slight drop in your score.

Balance transfer fees may apply to transferred debt

If you plan to use a 0% APR credit card to consolidate high-interest debt, you may need to pay a balance transfer fee, which is typically 3% to 5% of the amount you transfer.

While it may be worth paying this fee to save money on interest, it's still important to understand that balance transfers are rarely free.

Introduction The APR cycle won’t last forever

The 0% interest offer is only available for a limited time – ranging from 12 to 21 months, depending on the credit card. When the introductory period ends, the balance you owe will begin accruing debt at your card's regular variable interest rate.

Keep in mind that credit cards typically charge higher interest rates than other financial products, such as personal loans and home equity loans.

Zero-interest offers can make you smug

Last but not least, taking on debt with a 0% APR may give you a false sense of security. Since you know you won't accrue interest on your purchase, transferred debt, or both, it's easy to become complacent and pay less than you should each month.

Credit cards with 0 APRs (especially those with rewards) can even tempt you to spend more than you planned.

When it makes sense to get a 0% APR credit card

If you're responsible for your finances and want to save money on interest for a limited time, a 0% APR credit card can be a boon to your finances. Consider registering for one of these cards if:

  • You plan to make a large purchase and believe you can pay it off in full within the card's introductory period.
  • You desperately want to get out of debt and plan to pay off all or most of your balance while the card is available.
  • You're on a break from work or recently faced an unexpected expense, and you want a card that gives you time to pay off your new balance interest-free.
  • You have enough self-discipline to avoid racking up new balances that you can't easily repay.
  • You pay your credit cards and other bills on time consistently without any issues or difficulties.

When You Shouldn't Get a 0% APR Introductory Credit Card

The following may indicate that a 0% APR introductory card may be more trouble than it's worth:

  • Credit card debt is a major problem in your life, or a major problem in the past.
  • You've had trouble paying your bills on time before, and you're worried it will happen again.
  • You're worried that your new credit card might tempt you to overspend.
  • You want to move your debt to a card with a 0% APR so you can spend more money on your old card.

If you nod to any of these questions, you're probably better off skipping the 0% APR introductory credit card. You may not even want to take on any new lines of credit at all—at least until you're able to create a financial plan.

Debt Consolidation Alternatives

If you already have credit card debt and need to consolidate, consider some credit card alternatives. For example, a personal loan allows you to make fixed monthly payments at a fixed interest rate and know exactly from the beginning when you will be debt-free. Additionally, personal loans are not as prone to new fees as credit cards.

If you're a homeowner with equity in your home, a home equity loan or home equity line of credit (HELOC) may help consolidate your debt. Both options may offer lower interest rates than traditional credit cards, but keep in mind that these types of loans are secured by your home.

Whatever you decide, remember that your old debts and new expenses won't go away on their own. A 0% APR credit card can help you save money and buy you some time, but the rest is up to you.

bottom line

When used correctly, a 0% APR credit card can not only save you hundreds of dollars in interest fees, but can also help you reach your debt payoff goals faster. There are other benefits, such as additional consumer protection and earning rewards. But these cards come with some stipulations, such as losing the 0% APR discount if you make a late payment, as well as a balance transfer fee of 3% to 5% of each transferred balance.

A 0% APR introductory credit card can be a great tool for your personal finances if you stick to how you use it and fully understand its pros and cons. First, consider our list of the best 0% APR credit cards on the market today to easily compare your options.

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