Should you get a 0% APR credit card?

Most credit cards charge interest if you don't pay your balance in full by the bill due date. The interest is calculated based on the card's annual percentage rate, or APR, which is typically high compared to other forms of credit.

As of November 2023, the Federal Reserve listed the average credit card APR at over 21%, and according to Experian, the average credit card balance was $6,365. Using these figures, if your card's minimum monthly payment were your interest plus 1% of your balance, and that's all you paid each month, it would take around 25 years and cost over $10,500 in interest to pay off your debt. This is when having one of the top 0% APR credit cards can come in handy.

Below, CNBC Select reviews some of the pros and cons of 0% intro APR credit cards to determine if they are right for you.

A 0% intro APR credit card offers no interest charges for a set period — typically anywhere from six to 21 months. The 0% APR is considered an introductory or promotional rate, and you will switch to the card's regular APR once the promotion ends. 

The 0% rate may not apply to everything — some promos are for new purchases only, others may only be for balance transfers and some offers may cover both new purchases and balance transfers. Cash advances rarely qualify for 0% offers. Since not all 0% offers are the same, it's important to read the terms and conditions to make sure you understand the offer.

One of the longest zero-interest introductory periods on the market is currently offered by the Wells Fargo Reflect® Card. Cardholders can enjoy a 0% intro APR for 21 months on purchases and qualifying balance transfers (17.49%, 23.99%, or 28.24% variable APR afterward). Balance transfers made within 120 days qualify for the intro rate, BT fee of 5%, min: $5.

While there are many advantages of a 0% APR credit card, there are also some drawbacks to consider.

Save money on interest

If you are carrying a balance on your credit card each month, you may also be paying a high interest rate. It can sometimes feel like you'll never get ahead when a big chunk of your payment is for the interest charges. You'll get ahead much faster by not paying any interest for some time.

Pay off debt faster

If you have existing debt on credit cards with high interest rates, you can consolidate your debt by doing a balance transfer to a 0% APR credit card. With a 0% APR card, all of your payment goes toward the principal, allowing you to repay your debt faster.

Helps with cash flow for large expenses 

A 0% APR credit card can be good for expensive purchases you want to pay off over time with no interest. This can work to your advantage in a couple of different ways.

If you don't have sinking funds or savings set aside for your large purchase, you can still make your purchase when you need it, but you won't have to worry about paying extra in finance charges during the card's intro period.

If you do have money set aside already, you can still utilize a 0% APR card for the purchase as it will allow you to keep your money in a high-yield savings account while you pay down the balance on the credit card without accruing any finance charges. This way you're earning interest instead of paying it.

Earn rewards on purchases

Some 0% APR cards may have a welcome bonus where you can earn travel rewards or cash back by spending a specific amount within a specified timeframe. In addition, some cards may offer bonus rewards for making purchases in specific categories, like dining or groceries.

For example, the Capital One Savor Cash Rewards Credit Card offers a 0% intro APR for 12 months on purchases and balance transfers (after, 18.49% - 28.49% variable APR). New cardholders can earn a one-time $200 cash bonus once you spend $500 on purchases within the first 3 months from account opening, as well as bonus cash back on dining, entertainment purchases, streaming service spending and groceries.

Many credit cards may also have consumer shopping protections such as extended warranty and purchase protection, which can be useful if you run into problems with your purchases. 

Can temporarily lower your credit score 

Your statement balance on a 0% APR card is reported to the three major credit bureaus (Experian, Equifax and TransUnion) each month, so a big balance can hurt your credit score. 

That's because carrying a balance can lower your credit score if it raises your utilization ratio. Your utilization ratio is the percentage of total credit you're using. If you have $10,000 of available credit across all of your cards and balances totaling $5,000, you have a 50% utilization ratio. 

Experts generally recommend keeping your utilization ratio under 30% as the amount you owe is a major factor in calculating your FICO score – it accounts for 30% of your score. As you pay down your balance, your score should increase.

A hard inquiry from applying for a new card can also lower your credit score, though that's less of a factor than your utilization ratio, as new credit accounts for 10% of your score.

Must pay on time to keep your 0% rate

You could lose your promotional 0% interest rate if you're late paying your monthly bill. For instance, the terms and conditions of the Chase Freedom Unlimited® state: "We will end your introductory APR if any required Minimum Payment is 60 days late, and apply the Penalty APR." (see rates and fees)

You may want to set up autopay to make sure you pay on time. Autopay automatically transfers money from your bank account to pay your credit card bill on a scheduled date each month. You can set the payment to be any amount you want, but make sure that at least the minimum payment is made by the due date. 

Ideally, you'd pay more than the minimum if you're trying to pay off debt before the promo period ends. Having autopay set up ensures you won't forget to pay your bill by the due date and get hit with late fees and potentially lose your promo 0% interest rate.

Switches to high interest rate if you don't pay off debt during the intro period

If you have a large balance, paying the minimum only each month likely won't put much of a dent in your debt. Calculate how much you need to pay each month so that the balance is paid off when the 0% promo period ends, otherwise, you'll switch to a high interest rate. You may not receive notification from your credit card issuer when your promo period is nearing an end, so you may want to set a calendar reminder for yourself.

Some cards have limited or no rewards

Sometimes there's a tradeoff between earning rewards and getting a 0% APR. Some of the 0% APR cards with the longest intro period may not offer rewards or cash back at all. Balance transfers typically don't earn rewards on any type of 0% cards. If earning travel rewards or cash back is important to you, it may come at the expense of having a shorter promo period to pay off your balance.

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 choosing a 0% intro APR credit card, some things you'll want to consider are whether the length of the intro period is long enough for you to pay off your balance, whether your credit score is high enough to get approved for a new card and if the offer is for purchases only, balances transfers or both. Once you've determined those factors, you'll be ready to apply for a new card.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every credit card guide is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of credit card products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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