3 Signs You Shouldn't Use 0% APR Offers

If you're trying to avoid those costly credit card interest charges, 0% APR credit cards are a popular way to do it. The rate isn't permanent -- any company offering that wouldn't last long. Instead, these cards offer a 0% intro APR for a fixed time period. With some cards, you can get 15 months or longer of zero interest.

A 0% APR card can certainly save you money on interest. But it could also end up causing more problems than it solves. Before you finance any purchases this way, here are the warning signs that you probably shouldn't.

1. You already have credit card debt

It's never good to be in credit card debt. Sometimes it's your best option, like if you have an emergency expense, and a credit card is the only way to pay for it. But because of how much the interest costs, you should do your best to get out of credit card debt as quickly as possible.

Adding more credit card debt to the mix, even at a 0% intro APR, is only going to make your job harder. Also, keep in mind that the 0% APR is only an intro rate. After the intro period, it will go up quite a bit. If you haven't paid off the balance by then, you'll start getting charged interest on it.

You're better off not opening new cards or financing any more purchases while you're paying off credit card debt. The only time it could make sense to open a new card is if it's a balance transfer credit card. This type of card has a 0% intro APR on balances you transfer from other cards, so it can be useful for avoiding interest charges on credit card debt.

2. You haven't thought about how you'll pay back what you spend

The benefit of 0% APR offers can also be one of the biggest risks. When you're not being charged interest on a credit card, you may not be as motivated to pay it off. Some people only make minimum payments, leaving them with a hefty balance once the intro period is over.

Before you put any big expenses on a 0% APR card, make a payment plan for yourself. Decide how much you'll pay toward your balance per month. Make sure it's enough to pay off the card during the intro period.

To find out how much you'll need to pay, divide the amount you're planning to spend by the length of the 0% APR period. Imagine you're planning to spend $5,000 on a card with a 0% APR for 15 months. You'll need to pay at least $333.34 per month to have that balance down to $0 before the intro period ends. And remember that if you continue using the card, you'll need to pay even more.

3. You're planning to buy a home or a car soon

When you apply for a mortgage or auto loan, your credit score is extremely important. It's one of the biggest factors in your loan's interest rate. For example, rates on a 30-year mortgage could range from 6.585% to 8.174% depending on your credit score, according to MyFICO (as of March 2024). A low credit score could easily cost you over $100,000 in interest.

For that reason, you don't want to do anything that will damage your credit score before your loan application. That includes racking up too much credit card debt.

Your credit score is based on several scoring criteria, and one of the most important is your credit utilization -- the balances on your cards compared to their credit limits. If you open a 0% APR card and charge a large balance, it could lead to high credit utilization. This can take 25 points or more off your credit score -- exactly what you don't want. You're better off paying down credit card balances as much as possible before any big loan applications.

Credit cards with a 0% intro APR can be useful, but they can also end up costing you money if you're not careful. Only use this type of offer if you don't have any credit card debt, you've made a plan to pay off what you charge, and you won't be applying for a mortgage or a car loan any time soon.