4 reasons to consider a 0% APR credit card—and 4 reasons not to

These introductory credit card offers can be a great way to consolidate and pay down other high-interest debts. They may also represent an affordable, short-term way to finance expensive purchases. 

Yet before you apply for a new credit card, it’s important to take a deeper look. As with any type of financing, an introductory 0% APR credit card has pros and cons. You shouldn’t be so distracted by the potential to save money that you forget to consider the potential downsides of these offers as well. 

Below are key details about 0% APR credit cards and tips on how to decide if this type of financial tool might work for you.

Pros of 0% APR credit cards

There are numerous benefits a credit card with an introductory 0% APR could offer when you use the account in a responsible way. Here are four standout perks. 

Avoid interest during the promotional period

The most obvious benefit that a zero-interest credit card features is the ability to help you save money. During the promotional or introductory period on your account, you won’t have to pay any interest on certain types of transactions. Depending on the terms of your account, the 0% APR promo might apply to new purchases, balance transfers, and in some cases both.

Of course, the length of time your no-interest period lasts can vary. So, it’s important to pay attention to the details of your offer. In many cases, 0% APR credit card promotions range between six and 21 months. Paying off the full balance before the promotional period ends is the best way to maximize your savings. 

Credit score improvement

When you use a 0% APR credit card in a responsible manner, it may have the potential to improve your credit score. This could be especially true if you’re consolidating revolving debt with a new balance transfer credit card. 

When you open a new credit card and use it to pay down existing debt, you may lower your credit utilization ratio in the process. (Note: Credit utilization describes the percentage of your credit limits in use.) In general, a lower credit utilization ratio is better for your credit score than a higher one.

Reduce debt faster

Using a 0% APR credit card for a balance transfer also has the potential to help you get out of debt faster. If you don’t make additional charges on the card during the promotional period, all of your payments will go toward the principal balance each month. No portion of those payments comes out to cover interest charges like usual. 

Other rewards and benefits

For many consumers, the primary perk that 0% APR credit cards offer is the introductory rate the card issuer extends on these accounts. Yet some credit cards with promotional APRs may include other benefits such as rewards, welcome offers, and more. 

Your credit card won’t automatically close once the introductory period ends. So, pay attention to any benefits you might be able to use after the 0% APR offer expires on your new account. It’s also wise to compare available benefits and rewards on multiple 0% APR credit cards to find the best fit for your spending habits and lifestyle.

Cons of 0% APR credit cards

Despite the benefits, no-interest credit card offers also have drawbacks to consider. Before you apply for this type of credit card you should take a closer look at their potential pitfalls.

0% APR is temporary

No matter how generous the introductory APR period on your new credit card may be, eventually it will end at some point. No 0% APR offer lasts forever. 

When the zero-interest period expires, any remaining balance on your credit card will start to incur interest at the standard APR on the account. And thanks to recent interest rate hikes by the Federal Reserve, carrying credit card debt from month to month is even more expensive than it was in the past. 

As a result, it’s wise to think about what will happen when the promotional rate on your new account ends. If you’re not confident you can pay off the balance on your new account before that date arrives, you may want to at least consider other financing options for your situation. 

Balance transfer fees

If you use a 0% APR credit card to consolidate debt, the card issuer will most likely charge you a balance transfer fee. Balance transfer fees often range from 3% to 5% of the amount of debt you move to the account. 

In many cases, the interest you’ll save during the 0% promotional period should offset the cost of any balance transfer fees. But it’s still important to do your own calculations to make sure that’s the case. Although balance transfers could save some people thousands, it’s important to factor in the cost of balance transfer fees as they’ll cut into your overall savings. 

Possible loss of promotional APR

It’s important to read the fine print of your credit card agreement when you open any new account, including one with a 0% APR promotion. In many cases, the card issuer may reserve the right to end your interest-free promo early if you don’t pay your credit card bill as agreed.

Not only could a late payment put a premature end to your 0% APR period, it might also trigger the penalty APR on your account. If you fall far enough behind on your payments, you could face credit score damage, collection activity, and other negative consequences. 

Potential for problems

As with any credit card, it’s up to you to decide how to manage the account you open. But if you’re not careful, a credit card with a no-interest promotional offer might tempt you into making common credit card mistakes that could haunt you later. 

For some people, knowing they don’t have to pay any interest for a set amount of time could make it easier to justify purchases they might not make under normal circumstances. Yet if you overspend on a 0% credit card offer that applies to new purchaes, you risk building up a balance that’s too high to pay off before the introductory APR period expires. 

Likewise, some people may face temptations when using 0% APR credit cards for balance transfers. Once the original accounts are paid off, if you’re not following a budget you might fall back into the overspending habit. And if you start to build up debt on your original credit cards again while you’re working to pay down a balance transfer, you could face serious credit and financial problems in the future. 

Is a 0% APR credit card right for you? 

A well-managed 0% APR credit card can be a useful financial tool if you want to get out of debt or save money on large purchases. But you should only consider this type of credit card offer if you’re confident you can manage it in a responsible manner. If you’re worried you’ll overspend or you won’t be able to pay down your balance at a decent pace during the promotional period, an interest-free credit card might not be right for you.