How to use a 0% APR credit card as an interest-free loan

Preparing for a major purchase? You could pursue short-term financing in the form of a personal loan, home equity loan or home equity line of credit. But if you can afford to pay off the money you need to borrow in full within a few months, a better option could be a 0 percent APR credit card. This type of plastic can save a lot of money you’d otherwise spend on interest charges.

Learn how credit cards that function as zero-interest loans work, the advantages and disadvantages of a 0 percent APR credit card vs. a short-term loan and some worthy credit card products to consider.

How a 0% credit card works

A 0 percent APR credit card does not require you to pay interest on your credit card balance for a specified amount of time. This introductory 0 percent APR period often lasts between six and 21 months, depending on the card. Once this initial phase expires, the interest rate will increase to the standard (often variable) rate for your remaining balance due and any future purchases.

“The interest rate from there will depend on your credit. In many instances, cards that offer 0 percent interest during the introductory period charge a higher standard rate than those without introductory offers, although that is not always the case,” says Laura Sterling, vice president of marketing for Georgia’s Own Credit Union.

Note that these cards differ in their features, with some offering longer introductory periods and more benefits than others. Various fees, such as annual fees and balance transfer fees, can also influence the overall amount you’ll pay.

Pros and cons of a 0% credit card

Choosing and using a 0 percent APR credit card can offer numerous perks.

“For one, it allows you to make significant purchases or balance transfers without accruing any interest during the promotional period. This can effectively provide an interest-free loan for a major purchase or a period of respite to pay down existing high-interest debt,” explains Andrew Latham, a certified financial planner.

Switching from a card with a higher interest rate to a 0 percent intro APR card can not only save you on interest but also reduce your required monthly credit card payment.

Furthermore, consolidating debt with a balance transfer credit card at zero interest can help you pay off your debt much faster since every payment you make goes directly toward reducing the principal balance without any added interest charges.

Using any credit card responsibly, including those with a 0 percent intro APR, can even improve your credit score. Paying down debt reduces your credit utilization ratio, and making timely payments is a significant factor in determining your FICO credit score.

In addition, many 0 percent APR cards also provide rewards in the form of points or cash back, as well as possible sign-up bonuses and limited-time incentives. And these cards may also provide valuable perks like cellphone insurance, purchase protection and extended warranties.

However, 0 percent APR credit cards have their drawbacks.

“It’s easy to forget that the 0 percent APR period will end. You can hit that deadline and be surprised that your balance is suddenly higher than it was beforehand,” cautions Joe Camberato, CEO of NationalBusinessCapital.com. “Some 0 percent APR credit cards also charge higher interest rates after the intro period ends compared to standard credit cards, too.”

Zero percent APR cards may also charge a balance transfer fee that can range from 2 percent to 5 percent of your balance transfer amount. That tacked-on sum can hurt your goal of paying less overall for short-term financing via a 0 percent APR credit card.

Here’s another thing to keep in mind: When you apply for a new credit card, a hard inquiry will be made on your credit report, which may slightly lower your credit score. However, this impact is temporary and generally not a major concern unless you’re planning to apply for a loan in the near future and need to maintain an excellent credit score. For most situations, the slight decrease in your score is not something to be overly worried about.

Also, if you make a late payment or exceed your credit limit during your introductory period, you run the risk of terminating the 0 percent APR offer early and possibly being hit with penalty fees and rates.

Good candidates and scenarios for a 0% credit card

If you want to consolidate and pay off high-interest debt from existing credit cards you have, or if you need to borrow money for a major purchase that you plan to repay within a few months, you’re likely a good prospect for a 0 percent credit card.

“A good candidate is also someone with a strong credit score — typically 670 or higher — a reliable income and the discipline to pay off the balance before the 0 percent APR period ends,” Latham continues.

Here are three examples where applying for and using a 0 percent APR credit card vs. a short-term loan can be worthwhile:

1. Urgent home improvements. Let’s say you need to replace your old washer and dryer. You apply for a 0 percent APR credit card with a 0 percent intro APR of 18 months, and you put $3,600 on your $5,000 limit card to pay for the new appliances and installation. In this hypothetical, if you pay $200 per month on your card for 18 months, you can pay off your new washer and dryer without paying any interest.
2. A new home office. Imagine you want to convert an empty bedroom into a work-from-home space on the cheap, but you need to repaint and purchase a new desk and new computer that’ll add up to $3,000 total. “If you were to charge the $3,000 on a 0 APR credit card within a 12-month promotional period, you could pay $250 per month for 12 months and fully pay off the computer, desk and paint without paying any interest,” explains Latham.
3. Startup business expenses. “If you want to launch a landscape contracting company and you need to purchase two riding mowers that will set you back $6,000, you can apply for a 0 percent APR credit card,” Camberato says. If you pay $334 a month over a card’s 18-month 0 percent intro APR period, you’ll pay off the mowers in a year and a half without a penny going toward interest. “This can enable you to purchase the equipment you need and use your profits to pay off the balance instead of leveraging your personal funds,” adds Camberato.

How to choose the right 0% APR offer

Before applying for a 0 percent intro APR credit card, consider the following key features:

• Length of the offer: The most critical factor when choosing a 0 percent APR credit card is the duration of its introductory period. While most cards offer zero interest for at least 15 months, some cards go up to 21 months. This period determines how long you can avoid paying interest before the regular APR applies again.
• Type of offer: Zero percent intro APR credit cards can cover purchases, balance transfers or both. Sometimes, they may provide zero interest for purchases and balance transfers on different timelines. For instance, you might enjoy a 0 percent intro APR on purchases for 12 months and a 0 percent intro APR on balance transfers for 18 months.
• Lower rates and fees: “Look for a card that offers a low everyday interest rate — the rate that will kick in after your 0 percent APR period ends — as well as a card that ideally has no annual or balance transfer fees,” suggests Camberato.
• Perks and rewards: “For example, if you will be using the card to purchase fuel for a vehicle, look for an option that offers a higher cashback amount for that specific type of expense,” he continues.

Credit cards with a 0% intro APR offer you can use as a short-term loan

Here are four recommended 0 percent APR credit cards, reviewed by Bankrate, that are worth considering as alternatives to short-term loans:

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  Wells Fargo Reflect® Card

  
  The Wells Fargo Reflect® Card extends an enticing offer of a 0 percent introductory APR for a remarkable 21 months — starting from the moment the account is opened — that’s applicable to both purchases and qualifying balance transfers (made within 120 days of account opening). Then, a variable APR of 18.24 percent, 24.74 percent or 29.99 percent applies. Note that a balance transfer fee of 5 percent (minimum $5) also applies.
  
  Additionally, there are noteworthy long-term perks, such as cellphone protection against damage or theft, covering up to $600 per claim (subject to a $25 deductible; maximum of two claims per year) when you settle your monthly phone bill using this card. However, note that the foreign currency conversion fee is 3 percent. Furthermore, the card does not offer rewards, which may be a consideration for some potential users.
  
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  BankAmericard® Credit Card

  
  The BankAmericard® credit card offers a 0 percent intro APR for 21 billing cycles for any balance transfers made within the first 60 days of account opening, making it one of the top cards to help you pay off debt or cover a sizable emergency purchase. Then, a variable APR of 16.24 percent to 26.24 percent applies. A 3 percent balance transfer fee also applies.
  
  There’s no penalty APR, so you won’t get dinged with a higher interest rate if you make a late payment. However, are no rewards or other features to help give it long-term value. Frequently travelers may also find that this card isn’t a great companion for purchases abroad, since it charges a 3 percent foreign transaction fee.
  
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  Discover it® Cash Back

  
  With the Discover it® Cash Back, you benefit from a 0 percent intro APR for the first 15 months on both purchases and balance transfers (then a variable APR of 17.24 percent to 28.24 percent). A 3 percent intro balance transfer fee also applies (up to 5 percent fee on future balance transfers (see terms)). Furthermore, Discover’s popular plastic has a rewarding cash back program. You can earn 5 percent cash back (after activation) on rotating categories each quarter (on up to $1,500 in purchases, then 1 percent back) and 1 percent cash back on all other purchases.
  
  To get the most out of the card, activate the rotating categories every quarter and make eligible purchases. There are no annual fees, foreign transaction fees or penalty APRs with Discover cards. Additionally, Discover will match the cash back you earn at the end of the first year. Keep in mind that rewards are maximized by enrolling in and tracking quarterly rotating cash back categories, and the card’s value decreases in the second year after the Cashback Match offer ends.
  
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  Capital One SavorOne Cash Rewards Credit Card

  
  With the Capital One SavorOne Cash Rewards Credit Card, you get a 0 percent intro APR on purchases and balance transfers for 15 months from account opening, followed by a variable APR of 19.99 percent to 29.99 percent. Also, a 3 percent balance transfer fee applies on the amounts transferred within the first 15 months.
  
  The card’s generous rewards program offers 10 percent cash back on purchases made through Uber and Uber Eats (through Nov. 14, 2024); 8 percent cash back on Capital One Entertainment purchases; 5 percent cash back on hotels and rental cars booked through Capital One Travel; 3 percent cash back on dining, entertainment, popular streaming subscriptions and grocery store purchases (excluding superstores like Walmart and Target); and 1 percent cash back on all other purchases. Your rewards never expire, and there’s no minimum amount required for redemption.
  
  This card also has favorable terms like no annual fee and no foreign transaction fees. However, it’s worth noting that the SavorOne tends to have a higher ongoing variable APR compared to other rewards cards, and its welcome offer is relatively modest, providing only a $200 cash bonus after spending $500 in the first three months.
  

The bottom line

While plenty of great options exist, be careful when using a 0 percent APR credit card, as it can be easy to overspend or fail to repay your balance before the introductory period ends — which could lead to sticker shock after the interest rate adjusts higher.

“Develop a clear plan for how you will pay off the balance within the promotional period and stick to it,” advises Latham.

Lastly, consider alternative options that may better fit your repayment timeline and financial needs. For instance, you may be able to borrow more money and repay it over a longer time with a home equity loan or home equity line of credit; and if you aren’t eligible for a 0 percent APR credit card, consider a personal loan, which might be easier to qualify for.