by Giovanna Gilliotti, Community Outreach Manager, Consolidated Credit
You can save hundreds spending on a 0% APR credit card — but only if you play by the lender’s rules. If you have good or excellent credit, you may qualify for a credit card offer with an introductory 0% APR. When approved, you can charge purchases to the card without paying any interest during the introductory period, which could range anywhere between six months to as long as 24 months.
That’s a fantastic deal — but only if you know enough to avoid common pitfalls that could turn your smart shopping plan into a regrettable mistake.
Before you charge anything to a 0% APR credit card, check out these five tips on how much you can save and a few missteps that could throw your repayment plan off course.
- You can save hundreds of dollars on interest
Interest rates on traditional credit cards range between 13.99% to 23.99%. All of that interest will cost you over time, making your spending that much more expensive. Using a card with a 0% introductory APR instead can save you a lot of money as long as you pay more than the minimum, make the payments on time, and pay off the balance before the 0% APR offer expires.
If you pay off a $1,500 balance on a 0% APR credit card before the offer ends, you won’t pay a penny in interest. On the other hand, that same $1,500 balance on a credit card with a 19.99% interest rate would accrue interest the entire time you carry a balance.
You can easily find out how much interest you could save (or pay) by inputting some figures into a credit card interest calculator. For example, if you make only the minimum payment of $45 (three percent) on a $1,500 balance, you’ll pay more than $1,200 in interest over more than seven years it would take you to pay off the balance.
2. Paying late may cancel the 0% APR
With most introductory 0% APR offers, a late payment may cancel out the 0 percent APR, replacing it with a much higher interest rate. Make sure that you always pay by the payment due date on a card with a 0% APR offer. Even paying only a few days late could cancel that money-saving APR. If you do pay late, call the credit card issuer and ask the agent if they can let you slide just this once. They may give you a break if it’s a one-time issue.
3. Read the terms and conditions carefully
Before you apply for a 0% APR credit card, read the terms and conditions of the card and the offer carefully. Look for how long the introductory period will last and the interest rate that will apply after the intro period ends. Also, find out what happens if you miss a payment or pay late.
4. Avoid paying only the minimum payment
It may be tempting to pay only the minimum payment with plans to increase that amount later. However, the minimum payment listed on your credit card statement is designed to work in the credit card issuer’s favor. So, if all you pay is the minimum payment each month, you’ll have a remaining balance when the introductory period ends — and you’ll pay the price with all the interest you’ll pay until that balance is paid off.
Instead, take the amount you spent on the 0% card and divide that by the number of months minus 3 covered by the 0% introductory period. If it is an 18-month 0% interest period, divide the amount you spend by 15, and the result of that is how much you should pay each month. For example, if you charge $1,500 on a 0% card with an 18-month introductory period, you should be paying at least $100 per month. Your goal is to pay off the card with 3 months to spare in the introductory period. That will leave you with a cushion should an unexpected expense pop up in the interim. And if you can pay more, then do so, as it will serve to improve your credit.
5. Create a debt repayment plan
An introductory 0 percent APR gives you a lot of breathing room while you pay down your balance, especially if the intro period runs for 18 or 24 months. But don’t fall into the trap of running up balances on other cards or failing to pay more than the minimum payment on your other debts because you think you are saving money with a zero APR card. Spending, regardless of the terms, is never to be confused with saving! A dollar spent is a dollar that can’t be used for emergencies, important needs or even to pay down existing debt. So think globally and always pay more than the minimum amounts due on every card you have.
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