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Is 0% Interest for 12 Months a Good Deal?

Dec. 19, 2014
Credit Cards
Is 0% interest for 12 months a good deal?
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As you compare credit cards, you’re sure to see a variety of 0% interest introductory offers, all aiming to entice you. One of the most common offers is 0% APR on purchases (and sometimes balance transfers) for 12 months. Here’s what you need to know about how 0% interest credit cards work and whether 0% interest for a year is a good deal.

No interest credit card basics

Credit card issuers frequently offer zero interest introductory periods. Sometimes the offer is for purchases only, while other cards feature no interest on purchases and balance transfers during the given time.

When you carry a balance on a credit card, you normally have to pay interest on that borrowed money. During a 0% interest introductory period, you’ll pay no interest on any carried balances. This means you basically get to take your time paying off a large purchase, such as a television or vacation. Once the introductory period ends, your regular APR will kick in, which is determined by your creditworthiness.

Determining if it’s a good deal

While credit card offers can change over time due to industry trends, the most common range of introductory periods is currently from around six months to 18 months. This means a 0% interest offer for 12 months isn’t the longest term you can find, but it’s still a great offer.

If you plan to transfer a balance over from a high-interest credit card, make sure the 0% APR applies to both purchases and balance transfers. Note that even if there’s no interest on transferred balances and purchases, you’ll probably still have to pay a balance transfer fee. This fee—which is usually about 3% of your total debt—can really eat into the value of the zero interest card, so take this into account before you commit.

Don’t forget to also look at the disclosures to see what the regular APR will be once the introductory period ends. You may find a credit card with a longer 0% introductory period, but if the card with a shorter introductory period will have a significantly lower regular interest rate, that could be the better deal for you in the long run. However, this will only impact you if you plan to carry a balance once the introductory period ends.

Other factors to consider

There are many more factors to weigh when deciding if a credit card offer is a good deal. Don’t forget to look at fees—especially annual fees and balance transfer fees. You may also want to consider rewards programs and other perks, such as travel benefits, concierge services or discounts.

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