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Introductory periods are the honeymoons of 0% interest credit cards: They’re great while they last, but they don’t last forever.
An introductory period is the fixed amount of time — usually six to 18 months — that a credit card issuer doesn’t charge interest. This is a great time to pay down debt or finance a large purchase such as a vacation or a new kitchen appliance. But once the honeymoon ends, the remaining balance on your card will be hit with the regular annual percentage rate (APR).
At this point, you have three options: You can keep the card open and pay interest on the balance; you can transfer the balance to another 0% interest card; or you could flat out cancel the card. Some of these choices are better than others, depending on whether you carry a balance and how good your credit is.
If you carry a balance
If you still carry a balance once the introductory period is over, you’ll have to pay interest on the remaining amount. For example, say you open a 0% interest card with a 12-month introductory period and an ongoing APR of 10%. You charge $2,000 to the card during the first year, and pay off $1,500 of that balance. When the year is over, you’ll owe $550: the remaining balance, plus $50 in interest.
In this case, your best move is to pay off the balance as soon as possible to avoid accumulating more in interest. Although transferring the balance to a new 0% interest card is an option, this could hurt your credit score.
However, if the remaining balance is particularly high and you can’t reasonably pay it off quickly, it may be worth the credit hit to do a balance transfer. Just make sure to choose a card with a low balance transfer fee and no interest for balance transfers.
If you don’t carry a balance
In a perfect world, you pay off the balance before the 0 APR introductory period ends. If you can manage to do this, you’ll benefit from paying down debt interest-free.
In this case, your best move is to keep the card open and pay off future charges immediately to avoid accumulating a balance. Canceling the card is an option, too, but that can also negatively affect your credit score.
A word of caution
Watch out for deferred interest credit card offers, which can easily be confused with 0% interest credit card offers. Like the name suggests, deferred offers don’t waive the interest, they just delay it. If you don’t pay off the full balance on your card before the introductory period ends, you’ll be charged with retroactive interest for the full balance. To continue the example we used earlier, you would owe $700 after the introductory period: the remaining $500 balance, plus $200 of interest for the entire balance.
Most people open 0% interest credit cards to take advantage of the interest-free introductory period. However, once this period ends, it’s best for your credit to keep the card open, but avoid carrying a balance.