3 Reasons You Shouldn't Open a 0% APR Credit Card

If you want to make a large purchase, but don't have the funds right now, you might be tempted to use a credit card with a 0% APR intro period. After all, some of these credit cards come with long zero-interest periods -- some lasting 15 to 21 months -- which allows you to carry a balance over time without paying interest. 

These cards can be effective in helping you finance purchases, especially if you have the means to pay off what you charge. But in some cases, it can lead to a cascade of difficulties. If you're considering a 0% APR credit card, here are some reasons you might want to avoid them. 

1. You don't have a repayment plan 

A 0% intro APR credit card works best when you know how you're going to pay back what you borrow. If you're going into this credit card expecting to fly by the seat of your pants, you can put yourself in a bad position when the 0% APR period ends. 

Truth is, without a plan, the 0% APR period can have a lulling effect, especially if it's longer than a year. You might start thinking you have more time than you do and make only the minimum payments to stay in good graces with your credit card company. Once the zero-interest period ends, however, your card will revert to its go-to APR and you'll start accruing interest on any unpaid charges. 

Since these cards can easily trap you in credit card debt, avoid opening them without a clear plan in mind. For example, if you plan to charge $5,000 to a new credit card with a 21-month 0% APR period, you should expect to pay at least $240 a month. This would ensure you pay the full balance before the zero-interest period ends. If the monthly repayment doesn't fit into your current budget, it's probably wise to avoid making the purchase. 

2. You're applying for a new mortgage soon 

Opening a new credit card before applying for a new or refinanced mortgage is generally a bad idea. 

When you apply for a new credit card, you agree to let the credit card company run a hard inquiry on your credit. Hard inquiries stay on your credit report for two years and can temporarily hurt your credit score. Likewise, if you plan to make a big purchase on the card, you could risk running up your credit utilization, which makes up 30% of your FICO® Score. 

Since most lenders look at your credit score when deciding your mortgage rate, it's best not to affect it with a new credit card. Even having a slightly lower score than average could mean getting a higher mortgage rate, which could cost you thousands in interest over the long run. 

3. The card may have deferred interest 

If the 0% APR credit card in question is also a store credit card, then heed this warning: it could have deferred interest. 

A store credit card is one that's issued by a specific retailer and usually offers more points or rewards for shopping within its chain of stores. For example, the Capital One Walmart Rewards® Mastercard® is a store card that earns bigger rewards at Walmart. Likewise, the Lowe's Advantage Card is a store card that earns rewards only at Lowe's stores. 

Sometimes, these credit cards offer zero-interest financing, much like a 0% APR credit card. But read the fine print. If the card has deferred interest, then you could be in big trouble when the 0% APR period ends. With deferred interest, your credit card issuer will charge you interest retroactively for every day during the zero-interest period. This differs from most 0% APR cards, which typically start charging interest on the day your intro period ends. 

For example, let's say you charge $1,000 to a store credit card that normally has a 31.99% APR but comes with a six-month 0% APR offer. For the first six months, you can make minimum payments without having to worry about racking up interest. But when that six-month period ends, your credit card company will calculate how much you would have paid in interest during that period and charge you for it. If that were to occur, it would be as if you hadn't had the 0% APR period at all, you only deferred the credit card debt to a later time. 

Credit cards with a 0% intro APR can be an effective tool, so long as you use them wisely. If you have a repayment plan in place -- and you can sustain a brief hit to your credit score -- they could help you avoid credit card debt. If you're sure they're right for you, check out our list of the best 0% APR credit cards and see if one would suit your goals.