With so many alternative credit card perks and introductory provides obtainable, you might marvel, “Is a 0% annual percentage rate good?”
It’s a fantastic query. As with most issues, there are pros and cons to 0% APR credit cards.
Here’s what you could know that can assist you resolve if a 0% APR credit card is an effective addition to your pockets.
Pros of 0% APR credit cards
A 0% APR credit card provides cardholders an introductory interval — normally six to 21 months — throughout which they will not accrue curiosity on their credit card steadiness. This time interval might be extraordinarily useful in case your objective is to pay down credit card debt. After the introductory interval ends, cardholders shall be given a brand new APR; this charge will fluctuate relying on the credit card’s phrases and the cardholder’s creditworthiness.
Related: Are you paying sufficient consideration to your credit card’s APR?
Pay off giant purchases with out curiosity
If you realize you’ve gotten a big buy arising that you just will not be capable to repay instantly, a 0% APR credit card can provide you some further time to repay the buy with out accruing any curiosity.
Before inserting a big buy on a 0% APR card, guarantee you’ve gotten a plan to pay it off. Blindly charging purchases to a 0% APR card could appear acceptable in the brief time period. However, if you happen to can not repay the cost earlier than the introductory APR interval ends, you will begin accruing important curiosity.
Related: What is an effective APR for a credit card?
Pay down an current steadiness with out accruing curiosity
If you are carrying a steadiness on one other credit card, you might be able to switch that steadiness to your 0% APR credit card. Then, you possibly can work on paying down the steadiness with out accruing any extra curiosity.
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Related: The finest 0% APR credit cards
Improve your credit rating
Paying down debt may also help increase your rating because it lowers your credit utilization ratio, and making on-time funds in your card is the most essential issue used to find out your FICO credit rating.
Earn rewards
Some no-interest credit cards supply further rewards applications, corresponding to money again or rewards factors, which may result in extra financial savings. This can embody a welcome supply and money again or rewards factors based mostly on every greenback you spend.
For instance, the no-annual-fee Chase Freedom Unlimited® (see charges and charges) earns you at the least 1.5% money again on all purchases whereas providing a beneficiant introductory APR interval.
With Chase Freedom Unlimited, your 0% introductory APR interval will final for 15 months on purchases and steadiness transfers. After that, a variable APR of 18.99% to twenty-eight.49% will apply. To be taught extra, try our full evaluate of the Chase Freedom Unlimited.
Related: Why the Chase Freedom Unlimited needs to be the first card in each pupil’s pockets
Cons of 0% APR credit cards
Of course, a 0% APR credit card does have some drawbacks.
0% would not final endlessly
It’s essential to keep in mind that the introductory 0% APR interval will finally finish. If you have not paid your steadiness in full by the time it’s due, you will be hit with curiosity on that steadiness when the interval is over.
Related: What occurs when 0% APR ends?
Balance switch charges
If you need to switch your steadiness from one other card to your 0% APR credit card, you will be charged a steadiness switch charge. It’s normally 3% to five% — doubtless a lot decrease than the APR you are already paying, since the present common credit card APR is over 20%. Still, you need to consider that charge if contemplating a steadiness switch to repay your credit card debt.
Strict phrases and situations
Be certain to learn your card’s phrases and situations. For occasion, some cards solely apply the 0% APR supply to new purchases and do not lengthen it to steadiness transfers. Also, most of them will lower your 0% APR interval brief when you have a late cost. Know the phrases of your supply to keep away from any disagreeable surprises.
Ensure you confirm whether or not the card you are focused on provides a real 0% introductory APR supply or a deferred curiosity supply. With deferred curiosity, your credit card will nonetheless accrue curiosity throughout the deferred curiosity interval. You will solely be chargeable for paying that curiosity if you happen to do not repay the complete cost inside a sure timeframe. Deferred curiosity is often seen on retailer cards.
False sense of safety
While paying off balances in full every month is good, 0% APR cards generally is a great tool for managing giant purchases or debt if used responsibly.
Having stated that, no quantity of credit card rewards will be capable to offset the curiosity you will accrue if you happen to’re overspending in your credit cards. If a interval of not accruing curiosity will tempt you to spend greater than what you possibly can repay, a 0% APR credit card could do extra hurt than good.
Related: TPG’s 10 commandments of credit card rewards
Is 0% APR price it?
Whether 0% APR is price it is dependent upon your monetary targets and habits. If you possibly can repay or considerably pay down your credit card steadiness throughout the 0% APR interval, getting a credit card with this supply can prevent some critical cash and maintain you from paying undesirable curiosity.
However, if not accruing curiosity will tempt you to spend greater than you possibly can pay in your credit card, it undoubtedly will not be price it in the finish.
Related: How to keep away from and cut back credit card curiosity
Bottom line
A 0% APR credit card is a superb choice for somebody who needs to repay a credit card steadiness with out accruing curiosity. However, it is not the good resolution for everybody. Before making use of, take into account the card’s phrases and your debt cost plan to make sure you’ll profit out of your 0% APR credit card.
Related: How to decide on a credit card with 0% APR
