How a 0% introductory APR credit card can help you avoid high interest rates this year

How about an interest-free loan to pay off debt or cover a big purchase this year? It's not as far-fetched as you might think if you know how to strategically use a 0% introductory APR credit card.

Credit cards that offer a 0% introductory APR allow you to carry a balance for a set period, usually nine to 21 months, without interest accruing. Depending on the type of card, you may be able to make new purchases, transfer balances from another account, or both.

Considering that the average credit card interest rate it's currently more than 20%, which can mean thousands of dollars in savings. Just make sure you have a plan to pay off the balance before the promotional period ends, or interest will start accruing on the remaining balance.

If you're carrying a balance on your card, want to save money or just need a break from interest, here's how to take advantage of these promotional offers, as well as some other options worth considering.

What does 0% introductory APR mean?

0% introductory offer for April technically means annual percentage rate on your credit card is 0% for a certain introductory period after opening the account. After that window closes, the regular variable APR will apply to any outstanding balance you maintain on your card.

The actual length of the 0% APR period and what transactions it applies to will depend on the card. Introductory periods may apply to new purchases, balance transfers or both. If the card offers an introductory period for new purchases, you won't accrue interest on those particular transactions. You will still need to do the necessary minimum monthly payments and repay the balance before the promotional period ends.

If the card offers a balance transfer promotional period, you won't accrue interest on balances you transfer from other credit cards. However, you will likely have to pay a balance transfer fee.

What are the balance transfer fees?

A balance (or card) transfer offer can help you lower the interest you pay on the credit card debt you already have. To take advantage of the 0% APR balance transfer offer, you'll typically have to pay a balance transfer fee (typically 3% to 5% of the total balance you're transferring) or a flat fee — generally, whichever is higher.

If your 0% APR introductory offer has a balance transfer fee, you'll be charged each time you move a balance on the card. Keep that in mind when deciding whether transferring your credit card debt will actually save you money or just add to the balance you want to pay off.

How does the 0% APR introductory offer work?

If you plan to use the card's 0% introductory period, make sure you understand which purchases or transfers qualify. That way, you can start using the offer as soon as you're approved. Also find out if the promotional offer applies to new purchases, balance transfers or both.

There may also be additional rules about how long you have to do a balance transfer. For example, some credit cards may offer a 0% introductory APR for the first year or longer, but all balance transfers must be made within the first few months.

Just because it's a 0% APR card doesn't mean it's fee-free. There may still be fees for late payments, cash advances and foreign transactions. Many of these fees may apply during the 0% introductory period, including balance transfer fees.

It is also important to understand the consequences if you do not make at least your minimum payments during the promotional period. Most 0% APR offers include hefty late payment fees, and some credit card issuers may cancel the 0% APR promotional offer or apply a higher penalty APR if you miss payments. Depending on the issuer's terms, you may start earning interest on your balance right away. Read the fine print in any contract before signing.

Is the 0% APR offer the same as deferred interest?

Retailers advertising “no interest if paid by x date” refer to a deferred interest offerwhich is different from the 0% APR offer. With a deferred interest offer, you won't owe interest if you pay off your entire balance by the end of the promotional period. If you fail to pay off your entire balance before the promotional period ends, the interest you deferred will then be added to your balance.

With a 0% APR offer, on the other hand, as long as you make the required minimum payments, you'll start accruing interest on only remaining balance after your introductory period is over.

Here's one way to look at it: If you have a little doubt that you'll be able to pay off the balance before the promotional period ends, go with a 0% introductory APR offer instead of a deferred interest offer.

What happens when the 0% APR period ends?

Credit cards with a The 0% APR introductory offer lasts for a limited time only — usually between nine and 21 months. After that, a variable APR will apply, and any outstanding balance will receive that higher interest rate.

If you are unable to pay off the remaining balance by the end of the promotional period, you have several options. One is to do another balance transfer and move the remaining balance to the new card to give you extra time to pay off the debt. Another option is to apply for a fixed rate personal loan.

7 things you need to know about 0% APR credit cards

1. Introductory offer may apply to new purchases or balancing transfers

Before you apply for a card with a 0% introductory APR period, find out if it applies to new purchases, balance transfers, or both. Review which purchases or transfers are eligible so you can start using the offer as soon as you're approved.

2. Introductory 0% interest periods vary

Credit cards with an introductory 0% APR offer last for a set amount of time — usually between nine and 21 months. After that, a variable interest rate applies. Any outstanding balance will begin to accrue interest thereafter.

Before you apply, see how long the 0% APR introductory offer lasts. If you're planning to make a big purchase or transfer debt to take advantage of the 0% interest, make sure the balance is paid off before the introductory offer expires. If possible, choose a card with the longest introductory period.

3. A balance transfer card can help you repay your debt and reduce interest

If you're trying to lower the interest you pay on your credit card balance, a balance transfer card lets you move your debt to a new card with a lower interest introductory offer. Make a plan to pay off your balance in full before the offer ends to avoid being hit with a higher variable interest rate.

4. Some 0% introductory offers come with fees

If you are transferring a balance, you may have to pay a balance transfer fee of 3% to 5% of the amount. Depending on how much debt you need to transfer, you may need to multiple transfers over time and paid several balance transfer fees.

While a 0% introductory APR offer may sound nice, always read the fine print. You may also incur late payment, cash advance and foreign transaction fees that may still apply during the introductory period.

5. You are still responsible for the monthly payments

You won't be charged interest during your card's introductory period, but you'll need to make monthly payments to keep your account current. Failure to make a payment or being late to pay can mean burdened charges and may cancel your 0% APR offer entirely, depending on your issuer's terms. You can even start accruing interest at a higher penalty rate on your balance right away.

6. You usually need good or excellent credit to be approved

Many credit card offers, such as interest-free periods and rewards, require a good to excellent credit score, which is typically 670 to 850.

As you browse offers, see what the minimum credit score requirement is. If it looks like you won't qualify for any balance transfer offers, think again building your credit score. You can start with a credit-building card, such as a secured credit card, to establish good credit habits such as paying your bill in full and on time each month. As your score grows, you'll be able to qualify for a 0% APR card and other cards with rewards and benefits.

7. Don't cancel your credit card after you're done with your 0% APR introductory period

Canceling a credit card can hurt your credit scoreso it is best to keep the account open and continue to make timely payments. As you compare 0% introductory APR credit card offers, check out all the rewards and cash back offers, too. If you plan to keep using the card, you can earn rewards on your purchases going forward.

Frequently asked questions