A 0% APR Credit card still has a credit limit and a 0% APR credit card still reports to the credit bureau like any other credit card, so when you are at 100% of your credit limit, your credit score will drop tremendously. Even at 50% you will have a 80-100 point drop.
A 0 percent APR credit card can be a great financial tool, but there are debt traps to be aware of when using one. Always make the minimum payments on your credit card to avoid consequences like late fees, damaged credit and penalty APRs.
If you have no balance on your credit cards, your credit utilization ratio is zero, which could negatively impact your credit score. The exact impact on your credit score will depend on various factors such as your overall credit history and the other factors that go into calculating your credit score.
0% APR sounds like a scam but it's not. The dealer is just pushing the promotion, they get paid for the price of the car. The bank offers it because they want your business. If you lapse in payment, they get to make money on late fee or interest rate change. If you like the bank, you might do future business with them.
Your 0% APR deal could be canceled
Even with a 0% APR card, you'll still have to make monthly minimum payments — usually a small percentage of your balance. And if your payment is late, even by a single day, your card issuer could cancel the 0% offer and reset your card's interest rate to the ongoing APR.
Cons of a 0% APR Car Loan
Only borrowers with outstanding credit qualify. Availability is limited to specific models and trim levels. Shorter loan terms mean higher monthly payments.
1-9% utilization rate to optimize your credit score for a new line of credit application. Never 0% across all of your cards. Otherwise, ignore utilization as it holds no memory. Feel free to safely use 100% of your credit limit within a month, provide you pay off your statement balance in full before due date.
What is the highest credit score possible? To start off: No, it's not possible to have a 900 credit score in the United States. In some countries that use other models, like Canada, people could have a score of 900. The current scoring models in the U.S. have a maximum of 850.
In short, no, it isn't bad to have a zero balance on your credit card. Or, put another way, yes, it's okay to have no balance on your credit card; it can even help your credit score.
If you're disciplined to make on-time payments and pay off your balance before the intro period ends, then you will likely do well with a 0% APR credit card. However, if the 0% tempts you to overspend, you may face paying high interest charges if you're still carrying a balance after the intro period.
When your intro APR ends, your credit card's regular APR will kick in on any remaining and new balances. Knowing when your promotional period ends helps you pay off your balance beforehand and keeps you from being surprised by mounting interest on a residual balance.
Many manufacturers and dealerships advertise no-interest car loans. These loans are offered through captive finance companies, which the manufacturer owns, and are used to attract prospective buyers. As car loan interest rates soared over the past few years, no-interest car loans became a better and better deal.
A 0 percent introductory APR doesn't mean you should leave a balance on your card until the promotional period is up. For one thing, that isn't a great way to maximize the interest-free period. Furthermore, you're still required to make the minimum payments each billing cycle, even during an interest-free promo period.
In most cases, qualifying for a 0 percent intro APR credit card requires a good or excellent credit score. This means you'll need a FICO credit score of at least 670 or a VantageScore credit score of at least 661.
Of course, you can live without a credit score; it's not oxygen. And credit reports and scores are not always easy to live with. It's important to monitor them, and sometimes you may have to dispute errors you find.
Even better, just over 1 in 5 people (21.2%) have an exceptional FICO credit score of 800 or above, all but guaranteeing access to the best products and interest rates.
A FICO® Score of 650 places you within a population of consumers whose credit may be seen as Fair. Your 650 FICO® Score is lower than the average U.S. credit score. Statistically speaking, 28% of consumers with credit scores in the Fair range are likely to become seriously delinquent in the future.
Membership in the 800+ credit score club is quite exclusive, with fewer than 1 in 6 people boasting a score that high, according to WalletHub data. Since so few people have such high scores, lenders don't split the 800+ credit score crowd into smaller groups that get separate offers.
It can reflect badly on your score if you consistently (more than three months) have a utilization rate of zero percent because you've opened cards and aren't using them at all. That indicates to credit reporting agencies that you're not using your credit limits at all rather than using them responsibly.
While a 0% utilization is certainly better than having a high CUR, it's not as good as something in the single digits. Depending on the scoring model used, some experts recommend aiming to keep your credit utilization rate at 10% (or below) as a healthy goal to get the best credit score.
Lower utilization rates are better for your credit scores, and 30% could be better than 50%, 70% or 90%. However, a lower utilization rate might be even better for your credit scores. People in the highest credit score range tend to have utilization rates in the single digits.
A credit card with an introductory 0 percent APR can help you manage new debt or pay off old balances. However, a 0 percent intro APR card can hurt your credit if it causes you to carry a higher balance than usual or if you carry your balance beyond the introductory offer period.
For a score with a range of 300 to 850, a credit score of 670 to 739 is considered good. Credit scores of 740 and above are very good while 800 and higher are excellent.
Key takeaways
A 0% introductory APR card can help you pay off a large purchase over time without interest. These cards can also help you consolidate debt and pay it down faster — if you're willing to pay a balance transfer fee and stay disciplined in how you use them.