In a financial crisis like the one caused by the coronavirus, some consumers may turn to credit cards offering 0% introductory APRs to help get them through to the other side.
It’s a solid choice primarily available to people with good credit (FICO scores of 690 or higher). A 0% intro APR card allows you to charge expenses, such as groceries and other essentials, on your card and then pay them off perhaps months later, without interest. In the case of a sudden job loss, it can be the tool that allows you to continue feeding your family until you have an income again.
But 0% intro offers can be more complicated than they seem at first glance. In general, the debt needs to be paid off by a certain date, and you'll still have to make minimum payments to maintain the terms of the offer. Failing to do so can lead to much higher interest rates.
Here’s why you can’t just forget about your credit card debt on a 0% intro APR credit card:
Nerd tip: In a crisis, turning to an emergency savings fund instead of a credit card may be a better option because it's your own money and you won't have to worry about paying interest or fees at all. But if you don't have such a fund, a 0% intro APR credit card can be helpful — as long as you pay off your debt before the offer expires.
0% intro APR offers don't last forever
When credit cards offer 0% intro APR periods, they typically last 12 to 18 months, starting from the time you first get the card.
That means that as soon as that period is over, the annual percentage rate goes up to its regular ongoing rate. So you want to be sure to pay off the balance before the offer expires or interest could start accruing very quickly.
You must make the minimum payments to maintain the offer
During the 0% intro APR period, you must make each month’s minimum payment on time. Otherwise, you can trigger a higher APR on your account and lose the 0% intro APR offer entirely.
A 0% intro APR may not apply to all transactions
Some cards offer a 0% intro APR just on purchases; others feature the promotion on balance transfers only. While both kinds of offers can be useful, you want to be sure you know which one you have so you can leverage the benefits to your advantage.
If the 0% APR intro offer is for purchases, then the card is well-suited to help you buy essentials, like food, during a crisis. If the offer is for balance transfers, then the card is best geared toward helping you pay off existing debt.
And while you can certainly find cards offering a 0% intro APR on both purchases and balance transfers, you'll still have to keep track of your transactions and payments and when the promotions end.
Nerd tip: If you're taking advantage of a balance transfer offer, you'll likely owe a balance transfer fee, generally either a flat fee or a percentage of the balance you're transferring. Before moving an existing balance to a 0% intro APR card, make sure your savings on lower interest payments will more than make up for that fee.
‘Deferred interest’ or ‘special financing’ offers aren't the same as 0% APR
Some store cards come with something called a deferred interest offer on purchases, which means just that: Interest is being deferred or set aside, but not waived, as it would be with a true 0% intro APR offer. During a deferred-interest promotional period, interest is still being calculated. If you pay off the balance in full before the offer expires, then you’re off the hook. But if you still have a balance on the card — even a small one — when the promotion ends, you’ll have to pay all of the interest that accrued in the background during that period, retroactive to the date of purchase.