Key takeaways

  • A 0% APR credit card can be a great financial tool, but there are debt traps to be aware of when using one
  • Always make the minimum payments on your credit card to avoid consequences like late fees, damaged credit and penalty APRs
  • Pay attention to when the intro period ends and have a plan to pay your balance off before the end of the promotional period

According to a recent Bankrate survey, 47 percent of Americans are carrying credit card debt from month to month. When you can’t pay your balance off quickly, it can lead to a cycle of debt.

If you aren’t able to pay your balance in full each month, you might turn to a 0 percent intro APR credit card. These cards let you avoid interest charges for a promotional period of time — often between 12 to 15 months. The 0 percent rate will apply to new purchases, balance transfers or both.

The best 0 percent APR credit cards can help you finance a large purchase, get out of debt and avoid interest charges that could threaten your financial security. But for every person who successfully uses a zero-interest credit card as a life raft, someone else may end up making the kind of error that lands them in a debt trap.

Are you ready to avoid the pitfalls and use a 0 percent APR card to your advantage? Here’s what you need to know.

When getting a 0% APR credit card makes sense

Here are two of the best reasons to apply for a 0 percent intro APR credit card:

You have a large purchase you want to split into several monthly payments

When you put a large purchase on a 0 percent intro APR card, you essentially give yourself an interest-free loan — as long as you can pay off the purchase in full before the promotional interest rate expires. This means your large purchase should be affordable. If you can’t pay it off all at once, you should be able to set aside enough money over the next several months to pay it off in full.

You want to transfer and pay down debt while saving on interest

Some people use 0 percent intro balance transfer credit cards to consolidate debt. Since the best balance transfer credit cards offer a year or longer of zero interest on transferred balances, you have time to avoid interest charges and pay off as much of your credit card debt as possible.

With current credit card interest rates sitting at a high 20.72 percent, here’s how much money you could save with a 15-month balance transfer credit card.

Credit card with 15-month intro APR Credit card with 20.72% APR
Debt $5,000 $5,000
Monthly payment $381 $381
Months to payoff 15 15
Total interest paid $0 $884*

*Source: Bankrate credit card payoff calculator

As you can see, it’s possible to save a lot of money when you can avoid interest charges. Keep in mind, when you use a balance transfer credit card, you’ll have to deal with balance transfer fees, but in most cases, you still save plenty. To make sure a balance transfer credit card is right for you, use a balance transfer calculator to see how much you could save.

Debt traps to avoid with 0% APR credit cards

Zero-interest credit cards can be excellent financial tools. But there are disadvantages of an interest free period to consider. Here are the four debt traps to avoid when using 0 percent intro APR credit cards.

Don’t get the wrong card

There are different types of intro APR credit cards. Many carry a promotional offer for both purchases and balance transfers. But some only carry a promotional offer for purchases or balance transfers — not both.

When a 0 percent intro APR credit card carries a promotion for both, you can transfer debt to the card and make purchases up to any remaining credit limit. You won’t be charged interest for either until the intro period ends.

But if you get a card that only has a balance transfer offer, you should avoid making purchases on top of transferring debt. If you make purchases on a card that doesn’t carry an intro APR offer on purchases, interest typically starts to accrue the moment you buy something. That interest doesn’t stop accruing until you pay off your entire balance, including the debt you transferred.

To avoid this debt trap, check to make sure you get the right card for your needs. And avoid making purchases on a 0 percent intro APR card if there is no introductory offer for purchases.

Don’t rack up debt you can’t afford

Zero percent intro APR cards can sometimes feel like free money. After all, it’s easy to make excessive purchases on the card and tell yourself you’ll pay off the balance later.

But if you don’t pay off your balance in full before the zero-interest period ends, your credit card debt will begin to accrue interest — making it even harder to pay off your balance in the future.

How do you avoid this pitfall? Don’t buy anything you can’t afford to pay off before the 0 percent intro APR period expires.

Make the minimum payments

Even though your 0 percent intro APR offer won’t charge interest during the promotional period, you’ll still have to make the minimum payments each month. If you don’t, you’ll face several consequences.

  • Late fees. Most credit cards charge late fees when you fail to pay your bill on time.
  • Damaged credit. Late payments typically get reported to credit bureaus. Not only does that drop your credit score, but these negative marks can stay on your report for up to seven years.
  • Penalty APR. Some card issuers assess penalty APRs after one or more late payments. Penalty APRs are often much higher than the original APR that comes with your card, which could push you further into credit card debt.
  • Loss of intro APR offer. If you don’t make the minimum payment, the card issuer can cancel your intro APR offer. If that happens you’ll immediately begin accruing interest on any outstanding debt.

To avoid this debt trap, always make on-time payments on your credit cards, even if you can only make the minimum payment. And if possible, pay more than the minimum so that you can lower your debt as much as possible before the promotional period ends.

Pay attention to when the intro period ends

What happens when your 0 percent intro APR period ends? Once your promotional interest rate expires, any remaining balance on the card begins to accrue interest at the regular interest rate. If you forget when the intro period ends, you lose the opportunity to save money by paying off your balances in full before your credit issuer begins charging interest.

To avoid this debt trap, make a plan ahead of time on how to pay your balance down or off before the end of the promotional period. Create a budget to see how much you have to pay each month to eliminate your debt before the intro period ends. And mark your calendar or create a phone reminder for the end of the promotional period so you can make a new plan if it looks like you won’t be able to pay off your debt in time.

The bottom line

Credit cards that offer promotional interest rates can be excellent tools if you know how to use them. By avoiding the pitfalls of 0 percent intro APR cards and making a plan to pay off your balance in full before the intro offer expires, you could save a lot of money on interest charges.

However, using a zero-interest credit card without a plan could cost you. If you are concerned that a 0 percent intro APR card might be more dangerous than useful for you, consider other options. A low-interest credit card, for example, could also help you save money on interest charges while allowing you to pay off a balance over time.