0% APR Credit Cards: The Pros and Cons

A few years ago, credit card companies started offering a 0% APR feature to attract more customers. APR stands for annual percentage rate, and it represents the interest rate that is applied to the balance you carry. With the 0% APR feature, you won't be charged any interest for an initial period of time. Getting this type of card may be helpful, but it's important to understand what's all involved. Here's a look at the pros and cons of this type of credit card.

Pros of a 0% APR Credit Card

Getting a 0% APR credit card means you will have a certain amount of interest-free time. During this period, no interest will be charged to your account. This usually lasts between six and twelve months. Sometimes the length of time varies, depending on your credit score.

In this sense, a 0% APR credit card can work like an interest-free loan. If you make a big purchase, you can take a few months to pay off the balance without have to worry about any additional interest charges. You might even think about setting up a payment plan for yourself. Each month, pay off part of the balance so that when the 0% APR period ends, you do not have any remaining debt.

In a similar way, if you have an existing balance on a credit card that charges a high interest rate, you could consider transferring it to a 0% APR credit card. You'll then have the chance to pay off the balance, interest-free. This technique could save you hundreds of dollars in interest charges.

Cons of a 0% APR Credit Card

While the introductory period of 0% APR is a nice feature, it does not last forever. Eventually, a regular APR will set in. You'll want to know what this rate is before you apply. If it seems too high, look for a different credit card with a lower interest rate.

You may run into problems with a 0% APR credit card if you have trouble paying off the balance. It can be easy to run up a high balance during the interest-free zone. When that period ends, however, you'll have to pay interest on the amount due. So if you do run up a high balance on the card, work hard to pay it off as soon as you can.

You'll also want to check your credit score before you sign up for a 0% APR card. The higher your score is, the more likely it is that you will be approved. Most 0% APR cards are designed for people with good or excellent credit. If yours is poor, however, you may still be able to find a card. Look for one that is made especially for your credit condition.

Like any card, the 0% APR credit card can work well if you use it wisely. Before you apply for one, look carefully at all of the options available. Then send in an application through the Internet. Once you've been approved, you can start planning ways to benefit as much as possible from the card.