Ideally, you'd try to find a card with both. But if you have to choose between 0 percent intro APR and an annual fee, then you may want to go with zero percent APR. This choice stands to save you more money on interest over the introductory period compared to the cost of a typical annual fee.
Even if you pay your balance on time and use your card responsibly, the one cost you'll always pay is the annual fee. Many credit cards don't charge annual fees. However, this expense can bring greater benefits than other cards offer, such as airport lounge access, bonus cash back, or extra rewards points for travel.
Comments Section No, there's nothing wrong with taking advantage of 0% APR, with some caveats. It's free money if used correctly. With that said, it won't meaningfully affect your credit as long as you're paying the minimum due with each statement.
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.
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.
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.
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.
Credit cards with 0% interest on purchases can be a good way to spread cost and build up your credit score. For example, you could use one to book flights, pay for a holiday or cover the cost of home improvements and then pay it back in monthly repayments.
Use the debt snowball method
In order to use this method, list all of your credit card debts from lowest balance to highest balance. Now start concentrating on wiping out the credit card with the lowest balance while still making the minimum payments on the other cards. The point of this strategy is to build momentum.
You can find plenty of rewarding credit cards that won't charge you for the privilege of carrying them. But generally, cards that do charge annual fees offer even better benefits or perks — extras that can easily outstrip the cost of such fees. In many cases, you'll come out ahead, despite the upfront cost.
Owning more than two or three credit cards can become unmanageable for many people. However, your credit needs and financial situation are unique, so there's no hard and fast rule about how many credit cards are too many. The important thing is to make sure that you use your credit cards responsibly.
Paying an annual fee for a credit card might be worth it depending on the card's rewards, cardholder benefits and whether you plan to carry a balance. You can use your existing spending habits to calculate if rewards and other benefits outweigh the cost of an annual fee.
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.
One of the best things you can do to improve your credit score is to pay your debts on time and in full whenever possible. Payment history makes up a significant chunk of your credit score, so it's important to avoid late payments.
Costs of an interest-free deal
If you still have money owing after the interest-free period ends, you'll be charged interest. Interest rates can be as high as 26%. Retailers also charge fees on interest-free deals, which may be added to the amount borrowed.
There are some differences around how the various data elements on a credit report factor into the score calculations. Although credit scoring models vary, generally, credit scores from 660 to 724 are considered good; 725 to 759 are considered very good; and 760 and up are considered excellent.
You'd save money on interest
If you paid $200 per month on such a card, you could become debt-free in 20 months with $0 in interest paid.
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.
0% APR auto loans are reserved for "well-qualified" buyers.
In most cases, "well-qualified" refers to borrowers with a credit score of 740 or higher. If a borrower isn't in this credit bracket and applies for the 0% APR offer, they could be taking a hit on their credit score that could have been avoided.
They make money on the car itself, not through financing. Dealers advertise 0% interest to sell slower-selling models, help clear out stale inventory, and to spark sales when the public isn't buying (like during a pandemic).
In addition to depreciation, monthly payments can lead to a strain on personal finances. Car ownership comes with ongoing expenses such as maintenance, gas, insurance, and taxes. These expenses can add up, making the total cost of ownership much higher than the monthly payment alone suggests.
0% intro APR cards require good to excellent credit
This means you'll need a FICO credit score of at least 670 or a VantageScore credit score of at least 661. If you have very good or excellent credit, which means a FICO score of at least 740 or a VantageScore of at least 781, your chances of approval are even higher.
Can I refinance my car with the same lender? Yes, many lenders will allow you to refinance your existing car loan. Keep in mind that lenders may not offer refinancing as an option. Especially if your vehicle is in poor condition, has low value, or you have few payments remaining on your existing loan.