What does a 0% APR mean?

If you adhere to our 10 commandments of credit cards and consistently pay off your balances in full each month, the annual percentage rate of your card may not be a major concern. However, unexpected events can arise, leading you to carry a balance and incur high-interest charges.

If you have found yourself in this situation, you might be thinking about applying for a credit card that offers an introductory 0% APR. So, what exactly is zero APR, and can it be beneficial for you? Here’s what you should understand.

What does 0% APR entail?

APR refers to "annual percentage rate," which signifies the interest charged on a carried balance on credit cards. Some cards promote a 0% APR for an initial period (commonly lasting from six months to two years), meaning no interest accrues on your balance during that time.

How can I obtain a 0% APR offer?

As with most credit cards, you need to apply and receive approval to benefit from a 0% APR credit card's introductory offer. Keep in mind that these cards typically require a good or excellent credit score for approval.

What are the advantages and disadvantages of 0% APR?

Advantages of 0% APR

• Time to settle a large expense: A credit card offering 0% APR is an excellent choice if you're planning a large purchase and will need to carry a balance for a few months. The 0% APR period enables you to repay the amount without incurring any interest.
• Ability to consolidate your debts: Often, you can transfer a balance from another card to the 0% APR card, allowing you to pay off that debt without accumulating more interest during the introductory 0% APR phase. While there’s usually a fee for this transfer, it’s often significantly lower than the interest you’re currently facing on your balance.

Disadvantages of 0% APR

• Limitations on applicability: The 0% APR offer may have specific exclusions, so it’s important to read the fine print to ensure it applies to your intended purchase, balance transfer, or cash advance.
• Illusion of safety: Even with a 0% APR, the only effective way to eliminate credit card debt is to pay more than the minimum payment. To avoid interest charges after the 0% APR period, create and follow a plan to pay off the balance completely before the introductory period concludes.

In summary

A credit card offering an introductory 0% APR enables cardholders to maintain a balance for a period without accumulating interest. This is a great choice for anyone needing to make a significant purchase or wishing to transfer an existing balance from another card. Nonetheless, we still advise creating a plan to pay down your credit card balances to completely avoid interest charges.