What does 0 percent APR mean?

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The essentials:

  • A 0 percent intro APR is a promotion that credit card issuers offer to new cardholders.
  • During the specified period—usually between 12 and 18 months— you won’t accrue interest on your credit card balance.
  • Transferring a balance to a card with a 0 percent intro APR offer can be an effective debt payoff strategy.

You’ve probably heard the tempting tagline credit card companies and retailers advertise for new cardholders: 0 percent intro APR. But what does it really mean?

The benefit of a card with a 0 percent intro APR is that you can borrow money for a limited amount of time without accruing interest. You still have to pay back the money you borrow but there is no added interest until the intro APR period ends. If you pay off your balance before the intro APR ends, you avoid interest entirely.

Is a 0 percent APR card right for you? In this guide, we’ll help you decide by analyzing the following:

What is a 0 percent intro APR?

To understand what a 0 percent intro APR is, you need to know how APR works. APR stands for annual percentage rate. It’s a metric that shows you the true cost of borrowing money, whether that’s through a credit card, loan or another line of credit.

APR takes the loan interest rate and combines it with any additional loan-processing fees (such as the origination fee associated with a mortgage) to give you a complete and accurate cost of borrowing. It’s expressed as a percentage of the total size of your loan or outstanding debt.

Since credit cards don’t have loan-processing fees, a credit card APR is generally synonymous with the credit card interest rate. Since an APR is calculated annually rather than daily, your credit card APR is a complete look at how much it’s going to cost you to borrow money for an entire year.

How does a 0 percent intro APR work?

If you pay your credit card statement balance in full each billing cycle, you’ll never have to pay interest, so the APR doesn’t really matter. But if you just make the minimum payment or don’t pay off your entire statement balance, you’ll be charged interest on whatever balance you carry into the next billing cycle.

In most cases, a 0 percent APR is a promotional interest rate that lets you borrow money at no cost for a fixed period, often between 12 and 18 months. During this time, you still need to make at least the minimum payment each billing cycle but you won’t accrue any interest costs.

The two most common 0 percent APR offers are for new purchases and balance transfers. Often, credit cards will offer both to new cardholders.

0 percent intro APR on balance transfers

A balance transfer is when a credit card company allows you to use its card to pay off a credit card balance with another company. The best balance transfer credit cards include a 0 percent intro APR offer to help you save money on interest and give you over a year to pay off your debt. After the 0 percent APR period ends, any remaining balance on the card will start accruing interest.

By transferring a balance from a high-interest credit card to a card with a 0 percent intro APR, you can ensure your entire monthly payment amount goes toward your original balance and not to added interest (at least while the intro APR lasts).

0 percent intro APR on new purchases

Some issuers offer 0 percent APR on new purchases as an incentive to sign up for a credit card. For example, a credit card may come with a 0 percent APR on new purchases for the first 15 months. During the first year and three months after opening the account, you will only have to make payments on the principal balance on the card (the actual amount you charged), not on additional interest.

This is a great way to fund a large purchase or pay for an unexpected medical expense, as long as you have a plan to pay off your debt before the 0 percent APR offer expires.

0 percent intro APR vs. deferred interest

An important distinction to be aware of is the difference between a 0 percent intro APR and a deferred interest offer. With 0 intro percent APR, there are no interest charges for the introductory period—ever. The regular interest rate only kicks in on whatever balance remains outstanding at the end of the intro APR period. There is no secret clock running in the background adding up charges.

Deferred interest, on the other hand, pushes off the interest payments to the end of the introductory period. If you pay off the entire balance by the end of the period, you won’t owe any of the interest. However, if you owe even a penny on the balance after the introductory period, you’ll owe 100 percent of the interest costs that have accrued during the deferred interest period. Plus, interest will continue to accrue on your unpaid balance as you work to pay it off. As such, deferred interest offers are rarely a good idea, unless you’re certain you will be able to pay off 100 percent of the balance before the deferred interest period expires (and you double-check there are no errant pennies owed).

What happens when a 0 percent intro APR ends?

When your 0 percent APR offer ends, your account converts to the terms outlined in your card agreement. You won’t owe any back interest, but from that day forward, you’ll begin accruing interest charges on the outstanding balance.

It’s important when picking out a credit card or financing a purchase that you look at the rates and fees after the 0 percent APR period. This is critical if you don’t anticipate being able to pay off the money you borrowed before the promotion ends.

How to choose a 0 percent intro APR card

The best zero-interest credit cards offer 0 percent intro APR rates that last for at least a year, giving you plenty of time to catch up on old debt or pay off a new purchase. That said, these kinds of 0 percent APR offers aren’t always extended to every borrower. Generally, you’ll need good or excellent credit to qualify. So check your credit score before you apply and consider building your credit before taking advantage of one of these top offers.

When choosing a 0 percent intro APR card, make sure you check not only the length of the intro interest rate but also the APR that will be applied after the promotional period ends. Even if you’re planning on paying off your purchases and balance transfers during the 0 percent APR period, life can happen—which is why it’s a good idea to be as prepared as possible.

It’s also a good idea to think about long-term value. If you’re in a lot of debt, you might prioritize the length of the intro APR offer. But if the difference between 12 and 18 months isn’t that important to you, consider value-adds that will outlive the intro APR offer, like rewards rate or additional benefits.

Our favorite 0 percent intro APR cards

Wells Fargo Active Cash℠ Card: Best for flat-rate cash back

The Wells Fargo Active Cash Card offers 0 percent intro APR for 15 months on purchases from account opening and on qualifying balance transfers from account opening (14.99 percent to 24.99 variable APR thereafter). Since this cash back rewards card also offers unlimited 2 percent cash rewards on purchases, you can earn money on everything you buy while saving money on interest charges. That’s a win-win—and when you add in the $200 bonus cash rewards you can earn after spending $1,000 on purchases in the first three months, the Wells Fargo Active Cash becomes a win-win-win.

Discover it® Cash Back: Best for rotating cash back categories

The Discover it Cash Back offers 0 percent intro APR for 14 months on both purchases and balance transfers (11.99 percent to 22.99 percent variable APR thereafter). It’s an excellent tool to help you pay off debt, fund the cost of a vacation and more. This rotating bonus category rewards card offers 5 percent cash back on popular spending categories that rotate every quarter (think Amazon.com, Walgreens, restaurants and grocery stores; activation required) for up to $1,500 in purchases per quarter (then 1 percent). In addition, you’ll earn 1 percent cash back on all other purchases—and thanks to Discover’s Cashback Match program, any cash back you earn during your first year as a cardholder will be matched at the end of the year.

U.S. Bank Visa® Platinum Card: Best for long 0 percent intro APR offer

The U.S. Bank Visa Platinum Card offers 0 percent intro APR for 20 billing cycles on purchases and balance transfers (14.49 percent to 24.49 percent variable APR thereafter). While this card doesn’t offer any cash back rewards on purchases, the lengthy intro APR period gives you plenty of time to save money on interest charges, pay off transferred balances, fund a large expense and more.

Pros and cons of a 0 percent intro APR

Used responsibly, there aren’t too many drawbacks to a 0 percent intro APR credit card. However, they aren’t for every situation.

Pros

  • Save money on interest charges
  • Catch up on debt with balance transfers
  • Buy now and pay later without additional costs

Cons

  • May foster bad spending habits when used incorrectly
  • Offers likely require good to excellent credit

How to make the most of a 0 percent APR period

  • If you transfer a balance to a credit card with a 0 percent APR offer, avoid adding new debt to your balance transfer credit card. Remember: When you transfer the balance of your credit card to a 0 percent APR offer, your initial credit card gets paid off. This can make it tempting to start putting charges back on that card, but that might keep you in debt longer.
  • Have a plan to take full advantage of your zero-interest period. Use the time to get ahead on payments and maximize your savings. Otherwise, you’re just pushing off the money you owe and not saving much at all.
  • Don’t use your zero-interest period as an excuse to buy more, or to spend money that you can’t pay back. Just because your credit card payments are lower right now doesn’t mean they’re always going to be. Once the introductory period ends, your balance starts occurring interest at the regular APR.

The bottom line

When you use a 0 percent APR offer to your advantage, you can fund a large purchase, catch up on old debt or simply borrow money without paying interest during the intro APR period. When used properly, 0 percent APR offers can provide convenience, relief and an avenue to get ahead on your finances.

But this benefit is not a free pass to spend frivolously or buy things that you can’t afford. If you don’t pay off your purchases or transferred balances before your 0 percent APR offer ends, you could find yourself right back where you started.