4 Times a 0% APR Credit Card Offer Makes Sense -- and 4 Times It Does Not

by Dana George | Updated July 26, 2021 - First published on June 2, 2021

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A 0% intro APR credit card promo is only a good deal when it serves your financial needs.

On occasion, you may receive a notice from a credit card company saying you qualify for a credit card with a 0% intro APR promotional rate. While it's tempting to jump on the offer, weigh the pros and cons to figure out if getting the card is in your best interest. Here are four times it makes sense to accept the card offer -- and a few reasons why it might not.

1. You have high-interest credit card debt and can transfer it to the 0% card

Let's say you currently have a credit card carrying a $6,000 balance and an APR of 17%. If you make the minimum monthly payment of $180 on your existing card, it will take you 46 months to pay off the card in full, and you'll pay a total of $2,177 in interest.

Now, let's say you're offered a card with a 0% promotional rate. It offers 0% intro APR on both purchases and balance transfers (not all cards do). You decide to take advantage of the card with the 0% promotional rate by transferring the balance from the card with the higher interest rate. The new card company charges 3% for the balance transfer ($180 in this example), so once it's done, you owe a total of $6,180. Because you want to pay the debt off in full before the promotional rate expires, you make a monthly payment of $344. Yes, it's almost twice as much as you were paying on the high-interest card, but the debt would be paid off in 18 months instead of 46, and you'd pay no interest.

2. You're making a large purchase

Imagine that you've been saving up for a bathroom update. The project is expected to cost $7,500. You'll have enough money in your bank account to pay for the project in full in the next few months but would like to get started sooner. You accept the 0% credit card, use it to pay for the bathroom update, and make equal monthly payments of $417 for 18 months. By that time, the project is paid in full, you didn't pay any interest, and you have an extra $7,500 put away to invest in your future.

3. You faithfully pay bills

If you're the kind of person who never forgets to pay a bill on time, it helps explain why you were offered a card with a 0% rate. One catch is that you must acknowledge that the interest rate will shoot up to the "regular" rate if you miss a payment. The best way to prevent that is to set up autopay so your payment is taken out of your bank account on the same day each month until the debt is paid off. And if you're used to paying bills on time already, this could be a good bet.

4. Your debt-to-income ratio is low

Part of determining your creditworthiness involves your debt-to-income ratio (DTI). In short, DTI compares how much you earn each month against how much you owe. Let's say you earn $9,000 per month, and your fixed monthly debts are $3,500. Your ratio is calculated by dividing your debts by your income. In this case, it would be 39% ($3,500 ÷ $9,000 = 0.388). The lower your DTI, the better. A low DTI shows creditors that you have access to debt, but you use it carefully. If your DTI is low and accepting a new credit card will not damage your DTI, you're in good shape.

When a 0% promotional rate credit card might not be a good fit

A credit card with a 0% promotional rate is not necessarily the right choice for you, even if you qualify. Here are four reasons why you might want to think long and hard about accepting such an offer.

1. The payments will tax your budget

As mentioned, you must repay the debt on a card with a promotional rate before that rate expires, or you'll incur interest fees.

Although using a credit card with a 0% promotional APR means you won't have to make interest payments, it will cost more per month than simply making the minimum payment on a debt. If there's any chance that you'll have trouble making that payment or you worry that it might be late once or twice, now is not the time to take advantage of a 0% promotional offer -- and here's why. First, your interest rate will shoot up to the standard rate, and interest will accrue. And second, late payments hit your credit report hard, and it was your excellent credit that got you the offer in the first place. You don't want to do anything to risk your credit reputation.

2. You have a "shopping" habit

Despite a strong credit score, you know if you have a problem with shopping for things you don't need. If you spend money when you're bored or buy things to make other people happy, now may not be the best time to take on new credit. It's possible to have a problem with overspending, even with a great credit score. Before considering any new debt, work to get your spending under control.

3. You're pushing your debt-to-income ratio

Before accepting any new credit, calculate your current DTI. Remember, you figure DTI by adding your monthly payments together and dividing it by the amount you earn each month. There's a rule of thumb suggesting that a "good" DTI is 36% or less. If you find that you're already over that limit, you may want to wait until you're carrying less debt to accept a new card.

4. You're trying to make yourself feel better

Some people are wired to spend money, and some to save. If spending is something that picks you up when you're sad or distracts you when you're anxious, don't accept a new credit card unless you need it and have a plan to pay it off before the promotional period expires.

A credit card with a 0% promotional rate can be a boon to your budget. It can also add unnecessary stress to your life. Take your time to weigh whether it's right for you.

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