Should you carry a balance on a 0% APR credit card?

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If you open a card with a 0 percent introductory APR offer, it may seem like there’s no downside to carrying a balance. After all, you won’t owe interest during the promotional period. So what’s the harm?

Even if it’s not attracting interest, carrying a balance can still lead to some negative consequences. It’s best to weigh them carefully before deciding to leave a balance on your card. Whether you should carry a balance during your card’s promotional period depends on your circumstances. In some cases, it makes sense to carry a balance. In others, not so much.

Why carry a balance during your intro APR period?

You’re transferring a balance from a high-interest card

Let’s say you already have a large balance on a credit card with a high interest rate and you’re struggling to pay it off. If you leave the balance on that card, you’ll end up paying a considerable amount of interest over time. Transferring the balance to a card with a 0 percent APR can allow you to pay some of your balance off each month without incurring more interest. In this case, carrying a balance on your 0 percent APR card as you pay it down gradually is a great way to save money on interest.

Just make sure you have a plan to pay down all or most of your balance before your intro APR period ends. Once it does, you’ll have to start paying the regular APR on the remaining balance.

You need to make a large purchase you can’t pay off right away

Similarly, you might want to spend money on something big that you need right away—like if you find out you have to get the transmission repaired on your car. Charging this to a new 0 percent APR card allows you to pay it off monthly without racking up interest. Carrying a balance on something you need time to pay for is a good use of a 0 percent intro APR offer.

Potential downsides of carrying a balance

Some intro APR offers only apply to purchases or balance transfers, not both

It’s important to know what your 0 percent intro APR period applies to. While many intro APR cards, including the BankAmericard® credit card and Discover it® Cash Back, offer a promotional period for both balance transfers and purchases, other cards have intro APR periods that only apply to one or the other.

For example, the Capital One Quicksilver Cash Rewards Credit Card offers 0 percent intro APR on purchases only for 15 months (15.49 percent to 25.49 percent variable APR thereafter), meaning any transferred balances would start accruing interest straight away.

On the other hand, the Citi® Double Cash Card allows you to transfer a balance and pay 0 percent intro APR for 18 months (13.99 percent to 23.99 percent variable APR thereafter) but has no intro APR for purchases, so any new charges to your card will attract interest.

If your card has an intro APR period exclusively for purchases or balance transfers, it’s best to use it for just that purpose until your intended balance (whether it’s a balance transferred from a high-interest credit card or the cost of that new living room furniture) is paid off in full.

You might lose your grace period

Depending on your card’s terms, carrying a balance during the 0 percent APR period could cause you to lose your grace period. Your grace period is the window of time between the end of your billing cycle and your payment due date when you don’t have to pay interest—but only if you don’t carry a balance. With some cards that offer a 0 percent introductory APR on balance transfers carrying a balance results in losing the grace period for purchases. To avoid paying interest on purchases, you would need to pay off your statement balance, including the amount you transferred, by the due date.

You still have to make minimum payments (and pay on time)

It’s also important to remember that a 0 percent introductory APR doesn’t mean you can just leave a balance on your card and walk away until the promotional period is up. You’re still required to make minimum payments. Some cards may end your promotional period and charge a penalty APR if a minimum payment is too long overdue.

How carrying a balance affects your credit

You may have heard that carrying a balance is a good way to build credit. This is just a myth. Credit card companies report the balance that appears on your statement to the credit bureaus. Whether you go on to pay the entire amount or carry some over to the following month doesn’t change the number reported for that month, and the FICO score doesn’t consider whether you’re carrying a balance.

So carrying a balance doesn’t help your credit, and it can actually bring your score down. That’s because leaving a balance on your card increases your credit utilization ratio, which is the amount you owe on revolving accounts like credit cards compared to your credit limit. A good rule of thumb is to borrow at most 30 percent of your limit because a higher ratio can hurt your score. (This is why canceling a credit card might lower your credit score.)

In addition to pushing up your credit utilization ratio, carrying any balance that isn’t covered by a promotional 0 percent APR leads to interest charges that mean you ultimately pay more for the things you buy. Allowing interest to pile up could make it harder to keep up with your payments and might increase the chance that you aren’t able to make your minimum payment on time. And missing a payment or paying late can bring down your credit score.

How to pay off your balance during your intro APR period

Paying off your entire balance every month is easier to do if you create a budget before using your card. Try to charge purchases to your card only when you have enough room in your budget to pay them off in full.

Your credit card company must send you a statement at least 21 days before your due date. When you get your statement, read it right away. Check the date your payment is due, and decide how you’ll make your payment. You may choose to pay through the credit card issuer’s mobile app or website, by phone, or by mailing in a check.

Making your payment immediately can help ensure that you don’t miss the due date and incur late fees or be subject to a penalty APR. If you need to wait to make a payment, it may be helpful to set up a reminder email or a notification on your phone letting you know when the due date approaches.

Keep in mind that if you were carrying a balance up until this point, you might continue to be charged interest from the date of your statement until the credit card company gets your payment, which is called residual interest. If your cardholder agreement says that residual interest applies, you’re better off making your payment as soon as possible to minimize the amount of interest you have to pay.

Paying your balance can be almost effortless if you set up autopay, which automatically transfers money each month from your bank account to your credit card issuer. You’ll still want to keep an eye on your credit card balance to make sure the funds in your bank account are sufficient to cover it.

What happens after your intro APR period ends?

If you choose to carry a balance during a 0 percent APR period, you’ll need to pay attention to the date the promotional period ends. After the introductory period, your credit card company will begin charging interest on balances that were previously covered by the 0 percent promotional rate. Going forward, you’ll be charged the current APR listed on your statement when you use the card.

The bottom line

There are good reasons to carry a balance during a 0 percent APR period, like if you’re paying down a balance from another card or if you need to make a large purchase. But carrying a balance during a 0 percent APR period can lead to unexpected interest charges or fees if you don’t read the fine print and monitor your card usage closely. Keeping a balance on your card from one month to the next could drive up your credit utilization ratio and negatively impact your credit score. So as always, the sooner you can pay off your balance, the better.