What is a 0% intro APR credit card?
Zero-interest credit cards allow you to make purchases — and carry a balance — without being charged interest for a certain amount of time. This is extremely handy for anyone who knows a big expense is in their future and anticipates that they won’t be able to pay it off before the bill comes due.
How does 0% intro APR work?
When you make purchases and don’t pay them off each month, you will incur interest.
Let’s say you’ve got a card that charges 18% APR and you spend $2,000 on the card. If you let that entire balance hang on the card one month after the bill is due, you’ll be charged $30 in interest. If you were to theoretically keep that same balance for a full year, you’d pay $360 in interest.
That’s where a 0% APR comes in handy. Many cards come with zero interest on purchases for a certain window of time after you open the card. You can carry as high of a balance as you want and you won’t be charged interest. Once that window closes, your balance will begin to accrue interest.
Some people use a 0% intro APR credit card as a way to pay down other credit card debt. You can put all new purchases on your 0% APR card and throw all your money toward paying off the credit card(s) that are suckling on your bank account.
One super important note is that you must still make the card’s monthly minimum payment. Even though you’re not being charged interest, you must still keep up with these payments.
Pros & cons of 0% intro APR cards
Pros:
- Great way to pay off debt — If you’ve got significant balances on high interest-incurring credit cards, you can switch your payments to a 0% intro APR card.
- Handy for emergencies — If you’ve got an unexpected expense (perhaps related to a medical emergency, automobile repair, etc.), you can use a 0% intro APR card to mitigate the interest charges of these bills.
- Useful for big purchases — Let’s say you’ve got the means to pay off a large purchase — but you don’t want to drop it all at once. A 0% intro APR card can help you to spread those payments over several months.
Cons:
- Often small welcome offers — Even the best 0% APR credit cards are often unimpressive when it comes to sign-up bonuses. Many premium credit cards come with bonuses worth potentially thousands of dollars. You almost certainly won’t find that with a 0% APR credit card.
- Can be deceptive — A 0% intro APR card can give you a false sense of security. You might be persuaded to make purchases you can’t afford because you know you won’t reap the immediate consequences of crippling interest charges.
- You’re restricted to your credit line — If you’ve got a large purchase or an emergency bill, you’ll be handcuffed by the size of your credit line. If you don’t have a stellar credit score, you may receive just a couple thousand dollars, which may not be enough to cover your bill.
How to choose a 0% APR credit card
There are scores of credit cards with 0% APR. The one you want depends entirely on your needs.
The first step to choosing the right card is to assess your goals. Here are the main questions you should be asking yourself:
- Are you willing to forfeit the ability to earn valuable rewards for a longer interest-free window?
- Do you need 0% intro APR for new purchases only, or do you want the ability to transfer a balance, as well?
- Do you want to earn travel rewards or cash back — or a combination of both?
- Are rotating bonus categories too much effort to keep track of?
One question you shouldn’t have to contend with is whether you’re willing to pay an annual fee. The best no-interest credit cards don’t charge an annual fee — which helps you to throw all your money toward paying your credit cards.
Summary
While 0% interest credit cards can help with big expenses, let me stress that you shouldn’t use them as an excuse to buy something you can’t currently afford. Don’t let a 0% APR credit card lull you into bad financial habits like buying a giant TV and renovating your house just because you know you can run up a balance and worry about paying it off later.
That 0% interest rate won’t last forever, and when it ends, you need to be ready.
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Source: moneyunder30.com