In an effort to save money, it may seem like a good idea to use only credit cards with a 0% interest rate. A no-interest offer isn’t permanent, however, generally lasting between 6 and 21 months.
So, to never pay interest on carried balances, you’d have to close or stop using a credit account once its 0% APR offer runs out. If there were a balance on the card, you’d have to transfer it to a new balance transfer credit card with zero interest.
You absolutely can do this, but it’s not a great idea and the Nerds don’t recommend making a habit of it.
The problem with perpetually transferring balances
Credit history counts for 15% of your credit score. This metric assesses your oldest and newest accounts, as well as the average age of all your accounts. If you were to have many closed 6 to 21-month-old accounts on your credit history, your overall score could take a hit. If you chose to stop using your card instead of closing it, long periods of inactivity could also negatively impact the length of your credit history.
Additionally, opening a new credit account may take your score down a few points, especially if there is more than one opened in a short period of time. The variety of credit accounts you use also factors into your FICO score. If you have many of the same types of accounts — for example, several credit cards and no installment loans — that won’t reflect well on your score either.
Normally, no interest credit cards are best for large purchases and consolidating or paying down existing credit card debt. It’s best to pay off your balance before that 0% interest rate runs out, but sometimes that’s not possible. In some cases, missing a payment is enough to void the interest-free offer and you might find yourself with a large credit card balance and a sky-high interest rate.
When that happens, it might be worth the credit score hit to save on the interest you’d be paying on that balance. If that’s the case, and you decide to do a balance transfer, plan accordingly to make sure it’s a one-time deal. That means finding the best credit card for balance transfers and introductory offers. It also means budgeting to pay down that balance before the introductory period runs out.
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