7 Min Read | Updated: August 28, 2023

Originally Published: June 14, 2021

How Do 0% Credit Cards Work?

Learn how to leverage the advantages of a 0% introductory annual percentage rate (APR) credit card to save on interest during the introductory period.

Low Interest Credit Cards

This article contains general information and is not intended to provide information that is specific to American Express products and services. Similar products and services offered by different companies will have different features and you should always read about product details before acquiring any financial product.

At-A-Glance

A no interest credit card is one that charges a 0% introductory APR on most purchases during a promotional period.

These cards can help you to save money, especially if you have a specific goal and plan to pay off the balance before the promotional period ends.

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.


A 0% introductory APR credit card could help you to save on interest. Especially when it comes to large purchases or balance transfers. But how much you end up saving will depend on the card in question and how you use it. With this in mind, let’s take a look at how you can choose a 0% intro APR card that aligns with your goals, and steps you can take to use your card wisely, in order to save the most.

Choose an Interest Free Card That’s Right for Your Goals

Should you get a 0% introductory APR credit card? The answer may be “yes” if having one helps you meet a specific financial goal. Some good reasons include:

  • You want to pay down high-interest debt by transferring the balance to a 0% intro APR credit card so that 100% of your payment goes toward the principal.
  • You want to make a large purchase – perhaps a big-screen television – and don’t have the cash in the bank. A no-interest card can effectively finance it for free if you pay it off during the introductory period.
  • You want to have a safety cushion to protect you from draining cash reserves or scrambling to find cash in an emergency, such as suddenly having to replace a major appliance.
  • You want to get a 0% interest rewards credit card to earn a large stash of points before the card starts charging interest.

Other things to keep in mind as you define your goals:

  • These cards typically offer temporary 0% APR promotions on purchases or balance transfers with many of these cards offering 0% introductory APR on both. However, the introductory period may vary for balance transfers and purchases, so you’ll want to check the card’s details to see how long the introductory period lasts and what’s included in it. Keep in mind that it’s very rare to find 0% interest extended to cash advances.
  • If you’re in the habit of paying your credit card balance in full each month, no interest credit cards don’t offer any benefits you aren’t already getting. You may be better off focusing on a rewards credit card.
  • Beware of sacrificing one goal for another. For example, remember that your credit score can be impacted by your credit utilization ratio – the portion of your total available credit that you owe at any given time. If you make a big purchase that maxes out your new card, you’ll likely lose some points off your credit score. Only you can decide whether the trade-off is worth it.

Pay Off the Balance on Your 0% Introductory Interest Card During the Intro Period

Whatever your goal, credit cards don’t offer 0% interest forever – once the offer expires, the card’s ongoing interest rate will apply. Because of that, using these cards successfully can require a lot of discipline. Without it, there is less advantage to a 0% introductory APR card, and you may end up spending more than you intended.

 

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 build up a $5,000 balance, you’ll need to budget about $417 per month.

Read the Terms and Conditions on Your No Interest Credit Card Deal

There are a number of 0% introductory APR interest credit cards out there, but they are not identical. That’s why it’s important to be sure that you fully understand the card’s terms and conditions. Here are some things to look for:

 

  • When does the introductory period end? No matter which card you choose, sooner or later, the 0% interest period will expire, and you’ll start being charged interest. Don’t skim the terms and conditions and assume the number you see specifies months – some cards measure the 0% interest period in billing cycles. That distinction could result in a shorter or longer interest-free period.
  • When you start paying interest, how much will it be? When the promotional 0% interest period ends, the card’s ongoing interest will kick in. The best way to avoid purchase APR is by paying the balance off before the introductory period ends.
  • Are you really getting 0% interest? Or just deferred interest? Let’s say you got a 0% introductory interest credit card and transferred a $2,000 balance to it. At the end of the promotional period, you still have a $400 balance. A true 0% introductory interest card will begin charging interest the first day after the promotional period and only on the $400. A deferred interest card will charge interest on the full $2,000 balance and for the entire length of the promotional period retroactively. In this instance, you won’t have saved anything.
  • What fees are you paying? The good news is you aren’t incurring interest charges. However, additional fees may still apply. These could vary depending on the card but some examples of additional fees and charges include an annual fee, a balance transfer fee (typically 3%-5% of the balance), foreign transaction fees, and late payment fees.
  • If you’re not careful, might the deal be called off? Some interest-free card agreements permit the creditor to end the promotional interest-free period earlier than scheduled if, for example, you exceed your credit limit or make a late payment, even by one day. To keep that from happening, it’s a good idea to pay careful attention to what you charge and set up automatic payments – or set a reminder on your smartphone – so you don’t miss a payment.

Other Important Considerations

There are a few additional considerations you’ll want to keep in mind when applying for a 0% introductory APR credit card.

  • Your credit history matters. As with many things in life, good credit pays off. Usually, if your credit score is 700 or better, you’re most likely to be approved. But if your credit is fair or poor, you may not qualify. If your score is fair, between 630 and 689, try applying through a credit union or a bank with which you already have a relationship. If your score is less than 630, you may not qualify for a 0% introductory APR card.
  • All cards have limits. The 0% introductory interest credit card issuer has the right to determine how much credit to extend, and it may not be as much as you want. Typically, you won’t find out what your credit limit is until after you’re approved.

FAQs on How 0% Credit Cards Work

How do you get the most benefit with a 0% APR card?

Making a large purchase with a 0% introductory APR card and promptly paying off the entire balance before the introductory period ends maximizes the benefit of the card. Any unpaid balance held beyond the introductory period will accrue interest. Note that interest may still apply for certain transactions, such as cash advances and balance transfers, even during the introductory period.

 

How do you qualify for a 0% credit card?

Most 0% introductory APR credit cards come with more stringent application requirements. For example, you may need a credit score over 700, a history of making on-time payments, and a minimum income to qualify. Each card issuer sets its own requirements, so check before applying.


The Takeaway

Used wisely, 0% introductory APR credit cards might potentially save you a lot of money. But to do that, you’ll want to set clear financial goals and, if possible, commit to paying off the full balance during the no-interest promotional period.


Allan Halcrow

Allan Halcrow is a freelance writer concentrating in business, human resources, and diversity and inclusion. He is also the author of four books on management.

 

All Credit Intel content is written by freelance authors and commissioned and paid for by American Express. 

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