When Diane Young of Denver, Colorado, needed the transmission replaced on her 2014 Toyota RAV4 last year, she turned to an unlikely source for funding. Instead of taking out a personal loan or using her favorite rewards credit card to cover the $6,100 repair bill, she told the shop to move forward with the work and applied for the Wells Fargo Reflect® Card.

The Wells Fargo Reflect Card automatically comes with a 0 percent intro APR on purchases and qualifying balance transfers for 18 months, plus cardmembers can get another three months with no interest (up to 21 months total) when they pay their bill on time during the intro period. A variable interest rate of 17.74 percent to 29.74 percent APR applies to remaining balances thereafter, but Young did the math and found she could charge the bill to her card and avoid interest completely if she paid around $300 per month for 21 months.

Young actually ended up paying more than the $300 monthly payment required to become debt-free within that timeline, which is news she celebrated. This means she used the Wells Fargo card as an “interest-free loan”, which easily helped her save hundreds of dollars in interest and potentially more.

Using a 0% APR card for shopping

A similar scenario applied when Kathy Delaney of Port Orchard, Washington, decided that using a credit card as an interest-free loan made sense last year. Delaney signed up for the Chase Freedom Unlimited® in September 2022 in order to take advantage of its 0 percent intro APR offer on purchases and balance transfers that applies for 15 months (followed by a variable APR of 19.24 percent to 27.99 percent thereafter). Once she got the card in the mail, she used it to pay for all her holiday gifts last year (around $700 in charges) and earned rewards on her spending and the card’s sign-up bonus along the way.

After that, Delaney made monthly payments through February 2023, paying her balance off entirely over the course of four or five months. Ultimately, this means she used her cash back card as an interest-free loan while also making her holiday shopping bill more manageable.

In these two examples, consumers made the most of their credit cards without falling victim to the common pitfalls of credit. If you’re wondering how you might be able to do the same, and how to avoid running into trouble, read on to learn more.

How to use a credit card as an interest-free loan

Successfully using a credit card as an interest-free loan requires some strategizing and self-discipline. For example, you need to come up with a plan to repay the money back within the timeline when 0 percent interest applies, and you have to have the fortitude to stick to it no matter what happens.

As you compare 0 percent APR credit cards and look for ways to use them to your advantage, consider the following tips:

Figure out how much you need to spend

Using a credit card as an interest-free loan works best when you need to access a specific amount of money for a specific reason. In the car repair example above, for example, Young needed to borrow $6,100. In the other example we provided, Delaney charged her holiday shopping bills to her account, which added up to around $700.

In any case, you will want to figure out how much money you need and why, then create a plan from there. This strategy works best in every situation where you want to use a credit card as an interest-free loan, whether you need to make a large purchase, or several, or if you’re using the card to consolidate high-interest debt.

Compare 0% APR credit cards

You’ll also want to compare credit cards that offer a 0 percent intro APR on purchases, balance transfers or both. Some cards in this niche offer cash back or other types of rewards on your spending, but these options typically offer 0 percent APRs for a shorter timeline.

If you’re willing to forgo rewards, you may be able to get a 0 percent APR on purchases, balance transfers or both for up to 21 months. Either way, you should look for a card that offers a 0 percent APR for as long as you need it, plus no annual fee.

Do the math on monthly payments

Once you know how much you want to borrow and which card you plan to apply for, you’ll need to do the math on monthly payments. If you plan to use a credit card with a 0 percent APR for 15 months to purchase a $1,100 washer and dryer set, for example, you would need to pay about $74 per month to become debt-free and avoid interest charges during that timeline.

$1,100 / 15 months = $73.33

If you plan to use a 0 percent APR card to consolidate debt, however, you’ll also need to factor in balance transfer fees. These fees typically amount to between 3 percent and 5 percent of the amount of debt you consolidate, and they’re added to your balance right off the bat.

As an example, let’s say you plan to use a credit card with a 0 percent APR for 15 months, and a balance transfer fee of 3 percent, to consolidate $1,100 in debt. In that scenario, you would owe an upfront balance transfer fee of $33 and need to pay back $1,133. This means you would have to pay about $76 per month over 15 months to use the card as an interest-free loan.

$1,133 / 15 months = $75.53

Make monthly payments automatic

If you have the discipline to manually make credit card payments each month, it’s perfectly okay to do so. You can also set up automatic monthly payments for the amount you owe, which your card issuer will deduct from your bank account on a day you specify each month.

Making payments automatic can help you stick to the plan you set up ahead of time, and it can ensure you avoid late payment fees and negative impacts to your credit.

The bottom line

While using a credit card as an interest-free loan may look easy, the fact “life happens” means that’s not always the case. The reality is, people who try to use a credit card as an interest-free loan often end up with more debt in the end, either because they weren’t disciplined enough to make the required monthly payments or because other unexpected expenses knock their plan off track.

The statistics don’t lie. Bankrate’s yearly emergency savings report showed that 1 in 3 Americans have more credit card debt than emergency savings, and that 25 percent of adults would have to use a credit card to cover unexpected bills of $1,000 or more. The study also showed that 68 percent of respondents worry they wouldn’t be able to cover their monthly bills if they lost their primary source of income.

With these details in mind, you’ll want to think long and hard before you use a credit card to rack up new debt. At the end of the day, using a credit card as a short-term loan works best when you use the card for debt consolidation or a specific purpose, and when you have enough extra income to make the required payments easily each month. Having an adequate emergency fund also ensures you won’t have to rack up more debt to pay for surprise bills or cover living expenses if you lose your job.