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Why Do Some 0% Interest Cards Not Offer Rewards?

Dec. 19, 2014
Balance Transfer Credit Cards, Credit Cards
0% Interest Cards
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Cash back bonuses and rewards for spending are two great perks to owning a credit card, yet some 0% interest cards refuse to offer these extras.

The truth is, a zero interest credit card can potentially save you hundreds, if not thousands of dollars on interest costs, which more than makes up for any potential shortfall in rewards.

Why some zero interest credit cards don’t offer rewards

There are a few cards on the market that offer both a 0% introductory interest period and rewards. However, you may find that some offer puny rewards, or none at all.

You shouldn’t be too worried about rewards if your goal is to pay down debt, as the 0% introductory interest period is ultimately your reward. The amount you’ll save on interest will likely far outweigh any rewards you might have received with a rewards credit card. For those who need help managing or getting out of debt, this is far more important than earning a few bucks on your gas or groceries.

Why get a zero interest credit card?

A credit card that comes with an introductory 0% APR period is essentially an interest-free loan, allowing you to carry a balance on the card with no interest costs for a specified time period.

This is a great deal if you plan on transferring an existing credit card debt to the new card via a balance transfer, or if you plan on making a large purchase that will be paid off little by little each month, before the no interest period ends.

Let’s say you carry $5,000 on a credit card that charges 15% interest, making just the minimum monthly payment of $100 (2% of the balance). You wisely choose to transfer the balance over to a no interest credit card that comes with a 12-month 0% APR period, and you pay off the balance in full before the intro period is up. Guess what? You’ll end up saving $2,900 in interest when all is said and done.

The length of the zero interest credit card period ranges by card, but is typically 6 to 18 months. In general, the longer the better, as you’ll have more time to pay off your debt.

What to look for in a 0% APR credit card

Not all zero interest credit cards are a good deal. Before choosing a card, it’s important to weigh several factors, such as the length of the 0% interest period, fees for transferring a balance, and whether late payments trigger a higher interest rate.

If you’re planning a balance transfer to a 0% APR credit card, keep in mind that there will likely be a fee for doing so. Average balance transfer fees are typically 3% to 5%, but a higher fee might be worth it if the 0% interest period is longer.

For example, one card might come with a 3% balance transfer fee ($150 on a $5,000 transfer) and a no interest period of just six months, while another may charge 5% ($250), but offer no interest for 18 months. The second card looks like the better deal, as you’ll have an additional 12 months to pay off the balance before interest kicks in.

Because of the money you’ll likely save in interest, zero interest cards are some of the best in the business, regardless of whether they pay out rewards.

Money image via iStock.