Published in: Credit Cards | April 7, 2020

The Danger of 0% APR Credit Cards

By:  Lyle Daly

We are committed to full transparency in our mission to make the world smarter, happier, & richer. Offers on The Ascent may be from our partners - it's how we make money - and we have not reviewed all available products and offers. That transparency to you is core to our editorial integrity, which isn’t influenced by compensation.

A 0% intro APR can be a double-edged sword.

There are plenty of 0% APR credit cards around, and on the surface, these zero-interest offers don't seem to have any drawbacks. For as long as the intro period lasts, the credit card company won't charge you interest on your balance. The only requirement is that you make your minimum payment every month.

While there's no trick to these offers, you may not realize that there is a danger to them.

Woman Looking At Credit Cards

Image source: Getty Images

How 0% APR credit cards lead to overspending

The danger of 0% APR credit cards is that they take away your motivation to pay off your balance in full, and that can cause you to spend more than usual.

When you know that your credit card company is going to charge you interest, you have a strong reason to either pay your bill in full every month or at least pay off as much as you can. With a 0% APR card, there are no immediate consequences if you only pay the minimum.

That lack of consequences makes it easy to start overspending. Even if you know it's a purchase you can't afford, you tell yourself that you won't need to pay it off right away. You reason that you'll be able pay for it at some point during the 0% APR intro period. It's tempting to think this way, and when you do, you can develop bad spending habits.

One issue with this is it prevents you from saving money. And you'll have an even bigger problem once that 0% APR intro period is over.

What happens when the intro period ends

Let's imagine you have a 0% APR card, and you've been spending more than usual. You always make the minimum payments. You assumed that you'd eventually wipe out that balance, but it has just kept getting bigger and bigger.

At some point, you lost track of how much time had elapsed on the intro period and now it has just ended. That means your credit card's APR is jumping from 0% to whatever the card's standard APR is. As of November 2019, the average credit card APR on accounts that are assessed interest was 16.88%.

To demonstrate how much credit card interest can cost you, if you have a $3,000 balance and an APR of 16.88%, you'd incur $506.40 of interest in a year.

A 0% APR credit card saves you money in the beginning, but it can cost you even more later. If you spend too much, you'll end up with high-interest credit card debt. And keep in mind that your credit card debt will only get more difficult to pay off if you are paying interest on it.

How to stay safe with 0% APR credit cards

Whether you applied for a 0% APR credit card specifically so you could finance a big purchase or you got a credit card that just happened to have one of these offers, you need to be smart with how you use it. Here are the key ways to stay safe with a 0% APR card:

  • Don't use the 0% APR as a justification for unnecessary purchases. Stick to your budget and your usual spending habits.
  • Pay as much as you can towards your credit card bill every month. Don't pay the minimum just because that's all you need to pay.
  • Make sure you know when the 0% APR period ends and do your best to pay off the card by then.

Don't pay credit card interest until nearly 2022

The Ascent just released a free credit card guide that could help you pay off credit card debt once and for all. Inside, you'll uncover a simple debt-cutting strategy that could save you $1,863 in interest charges paying off $10,000 of debt. Best yet, you can get started in just three minutes!

0% APR & Low Interest