How to choose a credit card with an interest rate of 0% per year.

A 0% APR credit card allows the new cardholder to pay no interest on payments or balance transfers for an initial period that typically lasts six to 18 months, sometimes longer. When the initial period of 0% ends, the regular annual interest rate takes effect. So, if the balance remains at 0% after the period expires, you will end up paying interest at the regular rate.

A card with a zero initial annual interest rate can be especially handy if you don’t have enough cash to pay for a major purchase, like a new refrigerator. You can pay for your purchase during the introductory period and pay no interest. Or maybe you owe $5,000 on a high-interest card. You can transfer this balance to a 0% card and save some serious money while you pay.

A credit card at 0% interest may be the best choice for a short-term, interest-free loan if you read the fine print carefully and plan ahead. Here are a few things to keep in mind if you decide to go down this path:

Consider card options 0%

Many issuers offer new cardholders with zero interest rates, but not everyone is the same. For example, some cards provide generous introductory periods, while others provide useful bonuses. When considering options, consider:

• Length of introductory period: Some cards are better suited for balance transfers than for purchases. The Citi Custom Cash℠ card, for example, offers a 15-month initial period of 0% APR for purchases and balance transfers (then variable APR from 14.74% to 24.74%). The Discover it® Balance Transfer card only provides six months of initial 0% APR on purchases and 18 months on balance transfers (then variable APR from 12.24% to 23.24%).
• welcome bonusA: Some card issuers offer card sign-up bonuses with 0% APR that can help balance out large purchases. For example, the Bank of America® Customized Cash Rewards credit card offers cardholders a $200 bonus after they spend at least $1,000 within 90 days. It also has an initial 0% APR for purchases during the first 15 billing cycles and the same time period for balance transfers made within the first 60 days (then variable APR from 14.24% to 24.24%). In contrast, the Citi Simplicity® Card offers a 21-month initial period of 0% APR on balance transfers made within the first four months and a 12-month initial period of 0% APR on purchases (thereafter a variable annual interest rate from 15.49% to 25 .49%). ), but without the welcome bonus.
• FeesA: Fees can wipe out interest savings if you’re not careful, so take them into account. The Wells Fargo Active Cash® Card offers an initial annual interest rate of 0% for 15 months from account opening for purchases and balance transfers for the first 120 days (thereafter a variable annual interest rate of 15.74%, 20.74%, or 25.74 %). annual fee. However, it does charge fees for balance transfers, cash advances, foreign transactions, late payments, and bounced checks or payments.
• AwardsA: Some cards with 0% periods reward you in other ways, especially if you pay for a purchase. For example, the Blue Cash Everyday® Card from American Express offers 0% APR for 15 months on purchases only (then variable APR from 14.74% to 24.74%). By paying this amount, you can get a $200 credit by spending $2,000 within the first six months, plus you’ll get 3% cash back on US supermarkets (up to $6,000 a year in purchases, then 1%), 2 % at US Gas Stations and select US Department Stores and 1% on everything else.
• Regular APRA: The 0% APR offer is tempting, but that 0% rate will eventually expire. The rate you end up paying will be calculated according to your creditworthiness.

Find out how long it takes you to pay off the balance

Of course, a zero interest card exempts you from paying interest, but only during the zero interest period.

In light of this, it’s prudent to figure out how long you have to pay off your card balance from 0% APR before the regular APR kicks in and interest starts accumulating.

Luckily, the math is pretty simple. To get a rough idea of ​​how much you will need to pay each month to wipe your balance before the 0% period ends and the regular annual interest rate takes effect, divide your 0% card balance by the number of months to enter. period.

Let’s say the 0% APR period lasts 12 months and you buy a refrigerator for $2,400 right after you open an account. You have 12 months to pay off the $2,400 balance before the card issuer starts charging interest. During this period, each monthly payment must be at least $200 to avoid the usual annual income.

Similarly, if you have 18 months to pay off a $5,000 balance transfer, you can do so for $280 per month. Remember that this formula only works if you didn’t make any other purchases or balance transfers during the same 12 month start period.

Consider Other Card Benefits

0% APR on purchases, balance transfers or both is one of the top benefits of credit cards. But you may not want to choose a card based solely on 0% APR, especially since this offer will disappear at some point. It’s also better to look at other perks of the card.

Here are some examples:

• The Citi® Diamond Preferred® Card gives you special access to tickets to events such as concerts and restaurants through the Citi Entertainment® program.
• The Discover it® Cashback Card automatically matches all cashbacks you earn during your first year of card ownership.
• The US Bank Visa® Platinum Card protects your mobile phone for up to $600 (including $25 deductible) from covered damage or theft when you pay your monthly bill with it.
• The Chase Freedom Unlimited card allows you to get 5% cash back on trips purchased through Chase Ultimate Rewards, 3% at restaurants and pharmacies, and 1.5% on all other purchases.

Figure out what to do when the 0% period ends

This 0% per annum period will end. If you know you can pay off your balance in full before the zero rate expires, then you have nothing to worry about. Here’s what you can do if the balance remains when the APR switches from 0% to regular:

• Pay off the balance as soon as possibleA: At the expiration date of 0%, you will pay the regular annual interest rate as long as you have a balance.
• Ask for a lower rateA: If you have a positive history with your account, the card issuer may agree to grant your request for an APR reduction.
• Look at the balance transferA: You may be able to transfer the balance from a card with an overdue rate of 0% to another card with an initial rate of 0%.
• Consider a debt consolidation loanA: A debt consolidation loan can allow you to deal with a balance in APR that is lower than a normal APR for a credit card. However, be aware that if the loan repayment period lasts for a while, you may end up paying more interest overall than if you were just stuck with a credit card.

bottom line

A credit card with an initial interest rate of 0% can be a valuable element in your loan portfolio. Choose the card that suits your needs, whether it’s a balance transfer payment or a large interest-free purchase. However, read the terms and conditions carefully and develop a repayment plan during the 0% APR introductory period on the card to avoid unnecessary fees and interest charges.

John Egan is a writer, editor, and content strategist based in Austin, Texas. He is the author of CreditCards.com and his work has been published by Bankrate, HuffPost, Credit Karma, LendingTree, PolicyGenius, Vitacost, SpareFoot, LawnStarter and other online publications.