7 things you didn’t know about 0% APR cards

There’s a good chance you’ve heard about credit cards that offer a 0 percent introductory annual percentage rate (APR) at one point or another. Perhaps you received a preapproved credit card offer in the mail, or maybe you saw a commercial about balance transfer credit cards that are geared toward helping you pay down debt. But no matter where your knowledge of these types of cards came from, it’s important to understand what a 0 percent intro APR card can do — and what it can’t.

A credit card with a 0 percent intro APR offer can be a valuable tool, but if you’re deep in debt, it can’t automatically make your financial woes disappear. In fact, there are plenty of things to know about zero interest cards before you apply so that you can get the most out of your credit card and avoid some common pitfalls.

1. You’ll still have a monthly minimum payment

First off, you should know that intro APR credit cards still require you to make a minimum payment each month. This payment won’t include any interest for balances that qualify for the 0 percent intro APR offer, but it’s due just the same.

This can be seen as both a blessing and a curse. Sure, being eligible for an intro APR offer doesn’t get you off the hook when it comes to making a payment on your card. However, the fact that no interest is accruing does mean each dollar you pay goes directly toward the principal of your balance. Without any interest due, making payments helps you to pay off your debt more quickly.

2. Your intro APR may apply to balance transfers, purchases or both

Another common misconception about 0 percent intro APR credit cards is the idea that they let you skip interest regardless of how you use your card. The reality is quite different, and you’ll notice this when you begin comparing credit cards.

Credit cards with these promotions will offer their 0 percent intro APR for either purchases, balance transfers or both. But even when a card does offer a 0 percent intro APR on both purchases and balance transfers, they might offer each promotion for different lengths of time.

What does this mean for you? If you get in the habit of making purchases on a card that only applies a 0 percent intro APR to transferred balances, you may quickly notice that interest is accruing on your card. This is due to the fact that your card is charging different rates on balance transfers versus new purchases, but also because you typically do not qualify for a grace period on purchases when you’re carrying a balance.

To find out the terms of your introductory APR offer and how interest will be charged on your card, read the fine print on the credit card you’re considering. For example, the intro APR offer terms for the Citi Double Cash® Card, a popular balance transfer card, are as follows:

• New cardholders can get a 0 percent intro APR on balance transfers for 18 months, after which a variable APR of 19.24 percent to 29.24 percent applies.
• Balance transfers must be made in the first four months of account opening to qualify for the intro APR offer.
• A 3 percent intro balance transfer fee (minimum $5) applies to balances transferred within the first four months; after that, a 5 percent balance transfer fee applies.
• There is no intro APR offer for purchases.

3. Your 0% APR can be canceled

Here’s another important detail: If you qualify for a 0 percent intro APR offer on your credit card but your monthly payment is late, you may become ineligible for the intro APR offer immediately. This means you can go from paying a 0 percent APR on your credit card balance to the variable rate that your card charges overnight.

That’s one good reason to always pay your credit card bill early or on time. Another reason to do so is that your payment history is the most important factor affecting your FICO credit score.

4. Balance transfer fees can eat away at your savings

Before you transfer a balance to a credit card that offers a 0 percent intro APR for a limited time, you should be aware of any balance transfer fees you’ll have to pay. These fees are typically 3 percent or 5 percent of each balance you want to transfer, with a minimum payment that typically ranging from $5 to $10.

For example, if you wanted to transfer $10,000 in debt from a high-interest credit card to a card with a 0 percent APR offer and a 3 percent balance transfer fee, you’d have $300 added to the balance of your card on top of the $10,000 debt you just transferred.

While paying a balance transfer fee can make financial sense due to the interest savings you can achieve with a 0 percent intro APR offer, you’ll still want to factor these fees into your debt payoff plan.

5. You might not get as high of a credit limit as you need

Just like any other credit card, a 0 percent intro APR card will come with a credit limit that’s based off of your creditworthiness. You won’t know what credit limit you’re approved for until you get your credit card.

So, what happens if you have $15,000 worth of debt you’re planning on moving to your new credit card, but the issuer only gives you a $10,000 credit limit?

Unfortunately, you simply won’t be able to transfer all of your debt to your new card — at least not right away. You’ll have to pay down your debt on both cards until you have enough of a credit limit left to transfer the rest of your balance over to the new card, which at that point might not be worthwhile given the length of your introductory period or the size of your balance transfer fee.

If you’re going to apply for a 0 percent APR credit card with the intention of paying down debt, look for balance transfer cards with long intro periods and do your best to tighten up your credit score before you apply. You should also make sure you have a backup debt payoff plan for the rest of the debt you might not be able to transfer.

The same concept applies to any large purchase you were thinking of making. If your limit isn’t high enough, you won’t be able to make the purchase.

6. The 0% APR offer won’t last forever

Credit cards that offer a 0 percent intro APR each have their own unique perks and benefits. Some come with intro APR offers that last a lot longer than others, with offers typically ranging from 12 to 21 months.

Since you won’t get a 0 percent intro APR forever, you should plan ahead. Your best bet is to pay down your debts (or most of your debts) while interest isn’t accruing during the intro APR period. Once your 0 percent intro APR offer ends, your remaining balances will begin accruing interest at the standard variable interest rate.

7. Some 0% APR cards let you earn rewards

Finally, you should know that some cards with a 0 percent intro APR let you rack up cash back or flexible rewards for each dollar you spend. While these offers can be enticing, you should think long and hard about how spending more to earn rewards might impact your debt payoff plans.

If you’re looking at balance transfer credit cards for the sole purpose of getting out of debt, you should probably avoid cards that let you earn rewards, which might tempt you to start making purchases on the card during your intro APR period. Remember, you won’t earn rewards on that transferred balance anyway.

If you just want a 0 percent intro APR on purchases for a limited time, on the other hand, earning some rewards on your spending might not hurt as long as you’re not inclined to overspend.

The bottom line

Credit cards that come with intro APR offers can be diverse, so make sure to explore the best 0 percent APR credit cards before you decide. You may want a card with a 0 percent intro APR on purchases, or you might be better off with one that offers that covers only balance transfers. Make sure you compare all of your options based on the length of their introductory offers, the fees they charge and the cardholder perks you want.