The Pros And Cons Of 0% APR Credit Cards

Whether any credit card can positively affect your finances depends on how you use it. A 0 percent introductory annual percentage rate (APR) card can be beneficial if you make the right moves. If not, you may regret signing up for years to come.

Before you compare and choose a 0 percent APR credit card, it helps to know the potential advantages and disadvantages of these cards. Not only can this inform your decision on which card to get, but arming yourself with information can help you avoid ending up in more debt than you started with.

Pros of 0% intro APR credit cards

The main advantage of a 0 percent introductory APR credit card is clear — avoiding interest. However, other potential benefits are more subtle. Consider these pros before applying for any 0 percent interest credit cards.

You’d save money on interest

Credit cards with 0 percent intro APR offers can help you save considerable sums of money on interest. This would be true regardless, but — given the average credit card interest rate is currently around 20 percent — it’s especially true if your alternative is a traditional credit card.

Now consider a 0 percent intro APR card with an introductory period of 21 months, which aligns with some of the best cards available on the market right now. If you paid $200 per month on such a card, you could eliminate your debt in 20 months with $0 in interest paid.

For example, the Wells Fargo Reflect® Card offers a 0 percent intro APR for 21 months from the date of account opening on purchases and qualifying balance transfers made within the first 120 days. After the intro APR offer concludes, a 17.24%, 23.74%, or 28.99% Variable APR applies. A 5 percent balance transfer fee, with a minimum of $5, is charged on all balance transfers.

Your monthly payments could get lower

While saving on interest may be your goal, switching from a higher rate to a 0 percent intro APR can also reduce your required credit card payment each month.

But remember, your credit card’s APR will revert to your card’s regular rate after the intro APR period ends. In other words, your lower monthly payment won’t last indefinitely.

You can pay down debt faster

Paying zero interest on consolidated debt with a 0 percent APR card geared toward balance transfers, also called 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.

Your credit score can improve

Using any credit card responsibly can help you improve your credit score. Paying down debt can boost your score, as it lowers your credit utilization ratio, and making on-time payments on your card is the most important factor in determining your FICO credit score.

Cons of 0% intro APR credit cards

While there are many benefits associated with 0 percent intro APR credit cards, using your card incorrectly can lead to financial losses. Here are the biggest potential downsides of using this type of credit card.

New credit cards can temporarily impact your credit score

Applying for a new credit card leads to a hard inquiry on your credit report that can negatively affect your credit score. However, remember that the impact is temporary and minor.

Balance transfer fees can apply to transferred debt

If you plan to use a 0 percent intro APR credit card to consolidate high-interest debt, you will likely owe a balance transfer fee that typically ranges from 3 percent to 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 rarely free.

Your intro APR period won’t last forever

Zero percent interest offers are for a limited time only, ranging from 12 to 21 months, depending on the card. Once the intro period concludes, any remaining balance you owe will start accruing interest at your card’s regular variable rate.

Remember that credit cards usually have higher interest rates compared to other financial products, such as personal and home equity loans.

Zero percent interest offers can make you complacent

Zero percent APR credit cards can entice you to carry debt because you know interest isn’t accruing on your purchases, your transferred debts or both. This can make it easy to become complacent and pay less each month than you should.

Credit cards offering a 0 percent intro APR — particularly those with rewards — can even encourage you to spend more than you intended.

The bottom line

When used correctly, a 0 percent intro APR credit card can save you hundreds of dollars in interest fees — and if you get a card for balance transfers, it can also help you reach your debt payoff goal even sooner. There are also other advantages, such as additional consumer protection and earning rewards. But these cards come with stipulations, like forfeiting the 0 percent intro APR offer if you’re late with a payment, as well as balance transfer fees that range from 3 percent to 5 percent of each balance you transfer.

If you’re disciplined in using the card and are fully aware of both the upsides and downsides, you can utilize one of the best 0 percent intro APR credit cards on the market as an excellent tool for managing your personal finances.