Tips for Using 0% Intro APR Credit Cards to Borrow Money

You can think of a 0% intro APR credit card as a standard credit card with an introductory annual percentage rate (APR) of zero – much lower than the current average U.S. credit card APR of about 15%. A large number of 0% intro APR credit cards are available, all with varying features and benefits. But they have some features in common:

• Zero is temporary: The 0% rate doesn’t last forever. Typically, it lasts for one to two years, though it can be as short as six months. At the end of this time, the interest rate reverts to the card’s standard APR, which may be higher than on cards without the 0% introductory rate.
• Not for all transactions: The 0% rate usually doesn’t apply to every type of transaction you can do with the card. For example, it might only apply to purchases, not to cash advances.
• Added fees: 0% intro APR credit cards usually have fees and charges that may be higher than on other types of card.

Check the card’s “Schumer box” – the legally required table-format summary of terms in all credit agreements – to find the card’s standard APR, how long the 0% rate lasts, what it covers, and any fees and charges. 

The 0% rate can also be subject to conditions. These might include:

• Staying within your credit limit.
• Paying at least your minimum payment each month.
• Paying on time.
• Never having a payment returned by your bank or credit union.

If you break any of these conditions, the interest rate could automatically revert to the card’s standard APR.

It’s important to know that credit cards have multiple APRs, usually one for each type of transaction – for example, purchases, cash advances, and balance transfers. And a card’s 0% intro APR rarely applies to cash advances. Instead, when you take a cash advance from your credit card – typically from an ATM or a teller’s window – you’re usually charged an upfront fee and interest starts accruing immediately based on the card’s cash advance APR. Unlike with purchases, there is no interest-free grace period. This is why getting cash from your credit card is considered one of the most expensive ways to borrow money. In addition, most credit cards have a separate limit on cash advances that is lower than the card’s overall credit limit.

If you plan to make many purchases in a short period of time. Suppose you are furnishing a new home or apartment. You may be buying many things over a relatively short period of time, but not all at once. If you take out a bank loan, you’ll pay interest on the whole amount borrowed whether or not you have purchased anything yet. You could use a standard credit card with a typical interest-free grace period of one month, but that might not be enough time to make your purchases and clear your balance before interest charges kick in. So, using a 0% intro APR credit card could make sense. It could give you as much as two years to complete all your purchases and clear the balance without paying interest.

If you want to finance a large purchase. Suppose you want to go on the vacation of a lifetime and pay for it over 18 months. Using a 0% intro APR credit card could work out costing you less than taking out a bank loan, and unlike an equity loan it doesn’t put your home at risk. Check that the period for which the 0% interest rate applies is comfortably long enough for you to be able to pay off the balance. Also, when calculating the total cost of your holiday, take into account any fees and charges payable on the card. 

When considering making a purchase with a 0% intro APR credit card, it’s worth comparing the cost of using the card against any finance offers available for that item, as this might ultimately be cheaper than the card after taking other fees and charges into account.

When choosing how to finance such purchases, cost is usually not the only consideration. Flexibility is a big advantage of using a 0% intro APR credit card instead of a short-term loan. 

With a credit card, you can vary your monthly repayment amount, without penalty, as long as you make at least the monthly minimum payment. For more, read “How and When to Pay Your Credit Card Bill.” But keep in mind, if you pay only the minimum required, you may not pay off your balance within the 0% grace period. 

Still, the ability to reduce your monthly payments and continue to pay off the balance after the 0% period expires is one aspect of borrowing with a credit card that is usually not available with other types of loans, like installment loans. At that point you’ll pay interest based on the card’s standard APR, but this can nevertheless be an effective way of navigating a temporary variation in your finances. 

It’s generally not recommended to have an outstanding balance at the end of the 0% intro period, but if you do, you may be able to transfer it to another zero-interest credit card. However, card issuers won’t usually let you transfer to another 0% card issued by them, and repeated balance transfers can adversely affect your credit score.

There are at least three things to avoid when using your 0% intro APR credit card:

• Using it for general expenses. If you know you’re going to pay for your groceries in full at the end of every month, you may be better suited for a standard credit card with a typical one-month interest-free period and perhaps a cash back or rewards program.
• Carrying a balance past the intro period. If you don’t have significant cash savings to pay off your balance in a lump sum, consider setting up a payment schedule that ensures you pay down the balance completely within the 0% period – otherwise you could face high interest charges on a substantial balance when it ends.     
• Breaking the “fine-print” rules. As with all cards, exceeding your credit limit, missing payments, paying late, or otherwise breaking the terms and conditions of the card can adversely affect your credit score. But with 0% intro APR credit cards, it also typically hits your pocket. The issuer could revoke the 0% rate, leaving you paying the card’s standard APR on the outstanding balance and all future purchases.