By Allan Halcrow | American Express Credit Intel Freelance Contributor
7 Min Read | June 14, 2021 in Cards
A no interest credit card is one that charges a 0% introductory APR during a promotional period, typically six to 12 months. After that, the rate converts to the card’s standard APR and interest charges accrue on any balance if not paid in full.
These cards can save you substantial money, especially if you have a specific goal and plan to pay off the balance before the promotional period ends.
The specific terms of zero interest cards can be complex and may include a variety of fees. The creditor may also end the promotional period early if you violate the terms of the agreement.
You’re most likely to get approved for an interest free card if you have excellent credit. If you don’t, you may be approved for a lower credit limit than you want – or not get approved at all.
No or low interest credit cards are not necessarily no-brainers. Sure, they sound simple – you charge purchases to your card but pay zero interest for an introductory promotional period that usually lasts a few months or a year. And it’s true that, used wisely, interest free credit cards can save you money, especially on large purchases or balance transfers. Let’s look at how 0% introductory APR credit cards work and what using them wisely means.
Should you get a zero interest credit card? The answer may be “yes” if having one helps you meet a specific financial goal. Some good reasons include:
Other things to keep in mind as you define your goals:
Whatever your goal, credit cards don’t offer 0% interest forever – at some point, they convert to standard credit cards and begin charging interest on any remaining balance. Because of that, using these cards successfully can require a lot of discipline. Without it, there is less advantage to a 0% interest card, and you may end up spending more and staying in debt longer.
For example, it’s generally wise to avoid making a large purchase with the card and merely hoping you can pay it off before the card starts charging interest. And unless you have a very small balance, it’s usually best to avoid simply paying the minimum due each month. Instead, grab your calculator and figure out how much you’ll need to budget each month to pay off the balance during the introductory period. For example, if your card offers 12 months of 0% interest and you transfer a $5,000 balance, you’ll need to budget about $417 per month.
Finally, it may be easier to budget if you use the card for specific, planned purchases rather than pulling it out every time you stop for gas or tacos. In other words, it’s easier to manage a fixed balance than a moving target.
Creditors market numerous 0% interest credit cards, but they are not identical. That’s why it’s important to be sure that you fully understand the card’s terms and know exactly what you’re getting into. Here are some things to look for:
Even if everything about a no interest credit card sounds great, you may not always get what you want. Here’s why:
Used wisely, 0% interest credit cards might potentially save you a lot of money. But to do that, you’ll want to set a financial goal, commit to paying off the full balance during the no-interest promotional period, and read the fine print of the agreement to be certain you understand what you’re getting into.