Once the 0% or reduced-interest period is over, consider the: Interest rate you'll be charged on the balance. Interest rate you'll be charged on any future purchases. Annual fee or any other fees.
Once the introductory period expires, you have to pay interest on any remaining debts at the standard APR on the card. And as standard credit card APRs are usually at least 20%, that could prove expensive – especially if you can't clear the debt quickly.
It's extremely unlikely that your credit card issuer will extend an intro APR period, so you might have to switch to other cards if you want to keep that low rate.
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.
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.
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.
As long as you meet the minimum monthly payments, it's possible to stretch your credit card payments over a longer timeframe than your agreed interest free period. However, once your introductory 0% purchase rate expires you will be charged interest on these payments.
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.
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.
For a set period (for example, five years), you pay nothing off the amount borrowed, so it doesn't reduce. At the end of the interest-only period, the loan will change to a 'principal and interest' loan. You'll start repaying the amount borrowed, as well as interest on that amount.
Yes, you should make a plan to pay off a zero-interest credit card prior to the end of the promotional APR period. Failing to do so means you'll face interest charges on your remaining balance.
The introductory APR offer won't last forever
It is important to remember that 0 percent intro APR offers typically expire 12 to 21 months after opening the card. That provides a limited window of time in which to benefit, but it can also provide a false sense of security.
A 0% APR credit card offers no interest for a period of time, typically six to 21 months. During the introductory no interest period, you won't incur interest on new purchases, balance transfers or both (it all depends on the card).
It's generally recommended that you have two to three credit card accounts at a time, in addition to other types of credit. Remember that your total available credit and your debt to credit ratio can impact your credit scores. If you have more than three credit cards, it may be hard to keep track of monthly payments.
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.
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.
It's a good idea to pay off your credit card balance in full whenever you're able. Carrying a monthly credit card balance can cost you in interest and increase your credit utilization rate, which is one factor used to calculate your credit scores.
Both deferred interest offers and 0% intro APR cards do not charge interest if you pay off the entire balance before the introductory period expires. The difference is what happens when you don't. A 0% intro APR credit card will only start to charge interest on the remaining balance once your introductory period ends.
For someone with a good or very good credit score, an APR of 20% could be good, while a 12% APR may be good for someone with an excellent score. If your score is lower, an APR of 25% could be considered good. No matter your score, the lower the APR, the better.
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.
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.
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.