What happens when the 0% p.a. rate ends?

This is the best honeymoon for you and your new credit card: that 0% APR period when everything seems possible.

But like a real honeymoon, it doesn’t last forever. When real life and regular betting resumes, you may feel disappointed at the end of the ad funding period. But if you got down to business with realistic expectations, you’ve probably saved yourself some money.

Here’s what happens when your 0% interest ends and what you can do to keep accumulating your savings.

What you need to know when your initial 0% APR period ends

It’s not the end of the world when your credit card’s 0% APR ends. But if you haven’t finished paying for a major purchase or transferring a balance yet, that’s the end of your interest-free trip – and now you’re paying interest on whatever balance is still on the card.

According to Jill Gianola, financial planner and owner of Gianola Financial Planning, what you do after the 0% APR period depends on your account balance, how well you used the introductory period, and how honest you are with yourself.

There are basically three scenarios that happen when your 0% APR runs out:

• If you’ve got a higher balance, getting another credit card with 0% APR isn’t the best move, Gianola says. “Most likely, you will just dig yourself deeper and deeper.”
• If you’ve only made a little progress on your balance, it might not be worth it. For most cards, there is a fee for transferring the balance, which is usually around 3% (or more) of the amount you want to transfer, and add this to the cost of the annual fee, if any. If you don’t save more than interest, you might be wiser to keep that balance where it is and plan for larger payments until it disappears.
• If you paid your balance to $0, good for you. Now you can decide if you want to keep the map. Ask yourself these questions: What does it offer? Is there an annual fee? And if so, do you think the perks are worth more than what you pay for just the card?

How do you know when your 0% APR ends?

When you received your card, the issuer should have included information that specifies the length and terms of your initial APR period. You can also take a short cut and call the card issuer.

Many card issuers give you a set number of interest-free months—often six to 20 months or billing cycles, depending on the card.

But you and the bank can define “month” or “billing cycle” differently. To make sure you’re all on the same calendar, ask for an exact date – and get it in writing.

If you want to pay off your balance before resetting, create some extra time to anticipate financial emergencies that may occur regularly in life.

How do you know what your APR will go towards?

So what happens when your initial 0% APR period ends? Your interest rate is returned to the normal rate of the card and you will pay it on all remaining funds. Keep in mind that the average credit card interest rate is over 16%, according to CreditCards.com’s weekly report.

The documents you received with the card should have included an opening of the Schumer box, which lists the card’s regular annual interest rate (or range of APRs), as well as the interest rate charged by the issuer for balance transfers and cash advances.

Most credit card interest rates are variable, so annual interest rates fluctuate with interest rate fluctuations.

Another thing that affects your credit behavior in the months since you received the card. If you accumulate balances and click on the ATM to dispense cash, it will hurt you when the issuer completes your 0% APR period and the rate adjusts.

If you make payments on time, pay off balances, and reduce the percentage of lines of credit you use, this should help improve your credit score and your eventual APR.

And remember: any credit card is a zero-interest card if you pay it in full every month, Gianola said.

Ways to avoid paying interest after your initial 0% APR period ends

Right now you should take a serious look at your finances, strain your nerves and plan your next move.

If you are tempted to transfer any balances to another card with a 0% offer, it might not be that easy. Here are three reasons why:

• If you need to have a balance or finances are limited, you may not qualify for a low or no interest offer.
• If you plan to top up your balance, you will probably have to pay a balance transfer fee, which usually starts at 3%. This can get expensive, especially if you paid a fee for the same balance when you transferred it to your current card.
• Switching cards can hurt your credit. Opening and closing accounts, as well as maintaining a balance, are notoriously bad for your account. So saving a little money by chasing a lower annual income, you could end up losing a lot of money due to higher rates on houses, cars and other loans, said Bridges Dickey, financial advisor at Altfest Personal Wealth Management.
• If you are getting – or likely to get – more zero interest rate offers, consider using a competing offer to negotiate another low or zero interest period with your current card. You’ll eliminate balance transfer fees and avoid any potential damage to your credit history caused by opening and closing accounts, Dickey added.

Another way to reduce the money you invest in interest is to “pay off powerfully” the remaining balance until it disappears, making it a priority in your monthly budget.

Should a credit card be canceled when the introductory 0% annual interest rate ends?

You may consider canceling your card when your initial 0% APR period ends. But it’s important to think about how closing an account might affect your credit profile. Closing it can lower the average age of accounts on your credit report, which is 15% of your FICO score.

If this is your only unbalanced card, you’ll probably want to keep it. But if it’s a fairly new account, you don’t have a balance, and you have a lot of other loans available, you may not need this.

bottom line

Zero-interest card deals are the financial equivalent of “throw the can to the curb,” Dickey said.

They can give you a little breathing room and allow you to use the money you would have burned for interest to rebalance. But to really take advantage of one of them, you need a solid payout strategy that you can implement before the end of the 0% APR period.

“If you don’t have a plan to settle that debt, it’s really not going to do you much good,” Dickey said. “You want to have a solid, sustainable plan.”

Dana Dratch is a personal finance and lifestyle writer who loves to talk about money and credit. She also writes red herring puzzles (from Kensington Books), which are often money-driven. Contact her at: @ReadAboutMoney.