Best 0% Introductory APR Credit Cards of August 2020
What Can You Expect From 0% APR Credit Cards?
Here’s what you should know about 0% APR credit cards:
Introductory APR: About 13% of cards in this category have a 0% APR offer of 18 months on purchases. A 15-month 0% APR offer is more common.
Balance transfer offers: Nearly three-quarters of the cards surveyed have a balance transfer offer of 15 months or longer.
Annual fee: None of the 0% APR cards surveyed charge an annual fee.
Credit needed: More than half of 0% credit cards require good or excellent credit, but options are available for average, fair, limited or new credit.
How Can 0% APR Credit Cards Help You Save?
On a 0% APR credit card, your balance doesn’t accrue any interest during the introductory period as long as you make at least the minimum payment. This can offer significant savings if you’re paying off a balance over time.
“You’re essentially getting an interest-free loan to make payments on,” says Richard Kerr, founder of Award Travel 101, a Facebook community where members discuss how to maximize their travel rewards.
For example, Kerr says planned expenses such as medical bills may be a good use for 0% APR cards. Health care providers may offer financing, or you could apply for a personal loan to cover your medical expenses.
But if you have a $2,000 medical loan at 6% interest and take 12 months to pay it off, you’ll pay about $66 in interest. On the other hand, with a card that offers a 0% APR for 12 months, you won’t be charged any interest if you pay it off in the same amount of time.
Zero percent APR cards can help you save on debt consolidation, too. With a balance transfer offer, you can move balances from cards that charge interest onto a new card that temporarily charges a 0% APR.
“A 0% APR card in this scenario can essentially buy you time to get that balance paid off without incurring any additional interest rate charges,” says Alex Miller, founder of UpgradedPoints.com, which helps consumers learn how to make the most of their travel rewards.
If you have $5,000 in debt on a credit card with a 17% APR and pay it off in 12 months, you’ll pay about $456 monthly and about $472 in interest. But if you take advantage of a 12-month 0% APR balance transfer offer and make the same monthly payment, you can pay it off in 11 months with no interest charges.
Should You Use a 0% APR Credit Card for Rewards?
Some 0% APR credit cards earn rewards, which you can use for cash back, points or miles on interest-free purchases. But 0% APR cards may not earn the highest rates on rewards, so it’s a good idea to think of rewards as an added perk and instead focus on the interest savings.
“If you know you can avoid interest rate charges by using a 0% introductory APR card to fund an emergency purchase, then you’re also winning by earning rewards at the same time,” Miller says.
But he warns that you’ll need to pay off your balance within the promotional rate period. Otherwise you could pay more in interest than you get back in rewards.
A card with a 0% introductory APR and a sign-up bonus could help you save on interest while reducing the cost of an expense. To pay for it, you’ll earn the card’s $150 welcome bonus, which applies after you spend $1,000 within the first three months. The purchase will also earn 1% cash back for an additional $10 off, reducing a $1,000 expense to $840. And you’ll have more than a year to pay it off interest free.
How Can You Make the Most of 0% APR Card Offers?
An interest-free credit card, even if the perk is temporary, can be an exciting tool to have at your disposal. But it’s important to use 0% APR cards strategically and responsibly, remembering that the free ride doesn’t last forever and you still have to make payments.
“I’d really only recommend a 0% introductory APR for emergency situations,” Miller says. “This isn’t an excuse to buy that 52-inch flat-screen TV you’ve been eyeing.” He says it’s important to be responsible with 0% APR offers because you run the risk of not being able to pay the balance off within the promotional window.
Make at least minimum payments. It’s essential that you make at least the minimum payment on time during each statement period. If your payment is late, or you make less than the minimum payment, you’ll typically lose your promotional rate, and the credit card issuer will charge interest at the regular APR.
You may have to pay a late fee, and if you’re late by 60 days or more, a penalty APR may apply. It’s a good idea to set up reminders or automatic payments for at least the minimum so your payment will be covered even if you forget.
Understand how payments apply. When you pay more than the minimum required, that money goes toward whatever balance has the highest interest rate first. For example, if you take out a cash advance on your 0% APR card, any amount you pay over the minimum due will typically apply to your cash advance balance first.
While this can be helpful, as it allows you to reduce the interest-bearing balance, it can slow your progress if you’re trying to pay off your full balance before the introductory rate expires. It’s best to avoid making interest-bearing charges when you’re taking advantage of a 0% APR offer so you can pay down the balance as efficiently as possible.
Factor in other costs. Watch out for fees, including annual fees and balance transfer fees. Some 0% APR cards have an annual fee. If you’re taking advantage of a 0% balance transfer APR offer, you still may have to pay a 3% to 5% fee on the amount you’re transferring. While fees are sometimes worth paying if they allow you to save money overall, you should factor in their costs before deciding to take advantage of a 0% APR offer.
Plan ahead. If you know you have a large purchase coming up that you’d like to pay off over time, shop around for 0% APR cards. Kerr says the offers change all the time, so keep looking at what’s available until you find the offer you want or it’s time to make your purchase.
You don’t want to apply too early because the introductory APR usually starts from the day you open your account. Apply too late, and you may not have your card available when you need it. Ideally, you should apply about two to three weeks before you need to make the purchase, as it can take a few business days to be approved and typically about a week and a half to receive your card in the mail, depending on the issuer.
Know when your offer expires. The goal of using a 0% APR card is to pay off your balance before your introductory period expires, so make sure you know exactly when that is. Verify the date with your credit card company so you know when you need to have your balance paid in full and can get the most value out of your interest-free offer.