An interest-free credit card, even if the perk is temporary, can be an exciting tool to have at your disposal. But it’s important to use 0% APR cards strategically and responsibly, remembering that the free ride doesn’t last forever and you still have to make payments.
Make at least minimum payments. It’s essential that you make at least the minimum payment on time during each statement period. If your payment is late, or you make less than the minimum payment, you’ll typically lose your promotional rate, and the credit card issuer will charge interest at the regular APR.
You may have to pay a late fee, and if you’re late by 60 days or more, a penalty APR may apply. And it will most likely be reported to the credit bureaus, causing a decrease in your credit score. It’s a good idea to set up reminders or automatic payments for at least the minimum so your payment will be covered even if you forget.
Understand how payments apply. When you pay more than the minimum required, that money goes toward whatever balance has the highest interest rate first. For example, if you take out a cash advance on your 0% APR card, any amount you pay over the minimum due will typically apply to your cash advance balance first.
This will slow your progress if you’re trying to pay off your full balance before the introductory rate expires. It’s never a good idea to get a cash advance on any credit card due to the high APR, but it’s especially important to avoid these types of transactions when you’re trying to pay off a balance within a specific amount of time.
Factor in other costs. Watch out for fees, including annual fees and balance transfer fees. Some 0% APR cards have an annual fee. If you’re taking advantage of a 0% balance transfer APR offer, you still may have to pay a 3% to 5% fee on the amount you’re transferring. You need to factor in additional costs before deciding to take advantage of a 0% APR offer.
Plan ahead. If you know you have a large purchase coming up that you’d like to pay off over time, shop around for 0% APR cards. Credit card offers change frequently, so keep looking at what’s available until you find the most beneficial offer you can qualify for.
You don’t want to apply too early because the introductory APR usually starts from the day you open your account. Apply too late, and you may not have your card available when you need it. Ideally, you should apply about two to three weeks before you need to make the purchase, as it can take a few business days to be approved and typically about a week and a half to receive your card in the mail, depending on the issuer.
Know when your offer expires. The goal of using a 0% APR card is to pay off your balance before your introductory period expires, so make sure you know exactly when that is. Verify the date with your credit card company so you know when you need to pay your balance in full and can get the most value out of your interest-free offer.