The pros and cons of 0% APR credit cards

Whether any credit card will positively impact your finances depends on how you use it. A 0 percent intro APR or balance transfer card can be a godsend if you make the right moves. If not, you could regret signing up for years to come.

Before you choose a credit card in this niche, it can help to know the potential advantages and disadvantages of 0 percent APR credit cards. Not only can this inform your decision when it comes to which new card to get, but arming yourself with information can help you avoid ending up worse off than when you started.

Pros of 0% intro APR credit cards

The main advantage — avoiding interest — is obvious, but other potential upsides are more subtle. Consider these pros before you apply for a zero-interest credit card.

Save money on interest

This one shouldn’t surprise you, but 0 percent intro APR credit cards can help you save considerable sums of money on interest. This would be true regardless, but it’s especially true if your alternative is using a traditional credit card since the average credit card interest rate is more than 20 percent.

How much could you save? Imagine you have $4,000 in credit card debt at a 20 percent APR, and you decide you can pay $200 per month. In that case, it would take you 25 months to become debt-free, and you would fork out $906 in interest along the way.

If you paid $200 per month with a 0 percent intro APR, on the other hand, you could become debt-free in 20 months with $0 in interest paid. That assumes your introductory offer is at least 20 months, which is in line with some of the best offers available right now, including the Wells Fargo Reflect® Card.

The Reflect card offers a 0 percent intro APR for 21 months from account opening for purchases and for any qualifying balance transfers made in the first 120 days. After the intro APR offer ends, a 18.24%, 24.74%, 29.99% percent variable APR will apply. A 5 percent balance transfer fee applies to all balance transfers.

Consider using Bankrate’s credit card payment calculator to plug in your balance and interest rate and see how much you can save with a 0 percent intro APR card.

Lower your monthly payments

While interest savings could be your goal, going from a higher rate to a 0 percent intro APR can also lower your required credit card payment each month.

But remember, your credit card’s APR will pick up at the regular rate once your intro APR period ends. In other words, your lower monthly payment may not last long.

Pay down debt faster

Paying zero interest on consolidated debt with a balance transfer credit card can help you pay down your debt significantly faster.

Without any interest charges added to your bill each month, every cent you pay toward your debt goes directly toward your principal balance.

Enjoy perks and rewards on spending

Another benefit is that some credit cards with a 0 percent intro APR also let you earn rewards on purchases. This can include a welcome offer and cash back or rewards points based on each dollar you spend.

Credit cards can also come with valuable perks and consumer protections, including benefits like cellphone insurance, purchase protection against damage or theft and extended warranties.

Improve your credit score

Finally, using any credit card responsibly can help you improve your credit score. Paying down debt can help boost your score since it lowers your credit utilization ratio, and making on-time payments on your card is the most important factor used to determine your FICO credit score.

Cons of 0% intro APR credit cards

While there are many upsides to consider with 0 percent intro APR credit cards, using your card the wrong way can cost you money. Here are the main downsides of using this type of credit card.

Late payments can foil your plans

First, it’s important to understand that making a late payment on a 0 percent intro APR credit card can forfeit you the introductory APR period. This is because late payments are normally a violation of the introductory offer terms. You may even end up paying a penalty APR that’s higher than the card’s standard variable APR.

New credit cards can temporarily impact your credit score

Applying for a new credit card will result in a hard inquiry on your credit report that can ding your credit score. However, keep in mind that the impact is temporary and minor. Unless you need to keep your credit in tip-top shape because you’re applying for a loan soon, a slight decrease in your score is nothing to worry about.

Balance transfer fees can apply to transferred debt

If you plan to use a 0 percent intro APR credit card to consolidate and pay down debt, you’ll owe a balance transfer fee that typically falls between 3 percent and 5 percent of the amount you transfer.

While paying this fee may be well worth it for the interest savings, it’s still important to understand that balance transfers are seldom free.

Intro APR periods don’t last forever

Zero-interest offers are only for a limited time, usually anywhere from 12 to 21 months. When the intro period ends, the amounts you owe will begin racking up debt at your card’s regular variable rate.

And remember that credit cards typically charge higher interest rates than other financial products like personal loans and home equity loans.

Zero-interest offers can make you complacent

Last but not least, carrying debt at a 0 percent APR can give you a false sense of security. Since you know interest isn’t accruing on your purchases, your transferred debts or both, it’s easy to become complacent and pay less each month than you should.

Credit cards with a 0 percent intro APR — especially those with rewards — can even entice you to spend more than you planned.

When getting a 0% intro APR credit card makes sense

If you’re responsible with your finances and want to save money on interest for a limited time, a 0 percent intro APR credit card can be a boon for your finances. Consider signing up for one of these cards if:

• You’re planning to make a large purchase and believe you can pay off the full charges within the card’s introductory period.
• You’re serious about getting out of debt, and you have a plan to pay off all or most of your balance during the card’s introductory period.
• You’re in between jobs or recently faced some unexpected expenses, and you want a card that will give you some time to pay down new balances interest-free.
• You are disciplined enough to avoid racking up new balances you can’t afford to pay off.
• You consistently make on-time payments on credit cards and other bills, and doing so has never been a problem for you.

When you shouldn’t get a 0% intro APR credit card

The following scenarios indicate when a 0 percent intro APR card might cause more trouble than it’s worth:

• Credit card debt is a major issue in your life, or it was a major issue in the past.
• You have struggled to pay bills on time before and worry it will happen again.
• Having a new credit card could easily tempt you into overspending.
• You want to move your debt to a card with a 0 percent intro APR so you can spend more on your old cards.

You’re better off skipping 0 percent intro APR credit cards in any of these scenarios. You may even want to avoid taking on any new lines of credit at all — at least until you can develop a plan for your finances.

Alternatives for debt consolidation

If you have credit card debt already and need to consolidate, you can also consider some alternatives to credit cards. For example, a personal loan would let you pay a fixed monthly payment with a fixed interest rate, and you’ll know exactly when you’ll be debt-free from the start. In addition, personal loans don’t make it easy to rack up new charges as credit cards do.

If you have some equity built up in your house, you could also use a home equity loan or home equity line of credit (HELOC) to consolidate your debts.

Either option may offer a lower interest rate than traditional credit cards do, but keep in mind the loan will be secured by your home.

Whatever you decide, remember that your old debts and new charges won’t go away on their own. A 0 percent intro APR credit card can help you save money and buy you some time, but the rest is up to you.

The bottom line

When used correctly, a 0 percent intro APR credit card could not only save you hundreds of dollars in interest fees, but it could also help you reach your debt payoff goal even sooner. There are other advantages, too, such as additional consumer protection and earning rewards. But these cards come with stipulations, like forfeiting the 0 percent intro APR offer if you are late with a payment and balance transfer fees ranging from 3 percent to 5 percent.

If you’re disciplined in how you use the card and are fully aware of both the upsides and the downsides, a 0 percent intro APR credit card could be an excellent tool for your personal finances. If you’re interested in applying, consider our list of the best 0 percent intro APR credit cards on the market today to easily compare your options.