Here's What That 0% intro APR Offer Could Really Cost You

by Elizabeth Aldrich | Updated July 27, 2021 - First published on March 22, 2021

Many or all of the products here are from our partners that pay us a commission. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.
A woman holds her hand over her mouth in surprise at a bill.

Image source: Getty Images

You could end up paying hundreds in interest fees if you're not careful.

If you've ever had to pay off credit card debt, you know how expensive the interest fees are.

That's why credit cards with a 0% intro APR can be so tempting. They let you pay off a purchase interest free for a promotional period of up to 20 months, which could save you hundreds of dollars.

However, these deals can also cost you hundreds if you're not careful. Here's what you need to watch out for.

The true cost of a 0% intro APR credit card

You'll get a 0% intro APR for the duration of the card's introductory period, which is typically anywhere from 12 to 20 months, depending on the card. After this period ends, the card's interest rate shoots up to the ongoing APR, which is usually quite high -- anywhere from 15% to 25%. If you still have a balance on the card, you'll start paying interest on it at this rate.

Let's say you use one of these cards to finance a $3,000 purchase but only manage to pay off $1,000 by the time the introductory period ends. The card's APR goes up to 20%, and you still have $2,000 to pay off.

Believe it or not, if you're making the minimum monthly payment on this balance, you'll spend the next 12 years paying it off -- plus over $4,000 in interest. Even if you make heftier monthly payments of $150, it will still take you 16 months to pay off the remaining balance, and you'll spend $280 on interest.

What's more, if you miss a monthly payment during the introductory period, many card issuers will revoke your 0% intro APR offer. This means you'll have to start paying the ongoing interest rate on your balance immediately, which can be even more costly.

Making a plan to avoid interest

When used wisely, these credit cards have the potential to offer your budget some flexibility while saving you money on interest.

Ideally, you want to plan to pay off your entire balance before the card's introductory period ends. To do this, you'll want to divide the amount you plan to charge by the number of months in the card's introductory period. The resulting number will be your minimum monthly payment. If you can, round this number up to give yourself some wiggle room.

For example, if you plan to charge $5,000 to a card with an 18-month introductory period, you'll want to make minimum monthly payments of $278 to get the balance paid off on time. Round these up to $300 just in case, and if you can afford to put even more toward the balance at any point, do so.

This is assuming you're only putting purchases on the card within the first month and then using the rest of the introductory period to pay them off without adding any new charges. If you do make more purchases as you're paying down your balance, you'll need to factor those into your monthly payments.

That being said, if you manage to pay off most of your balance by the end of the introductory period but have a small amount left, the cost isn't typically outrageous. For example, if you end up with a remaining balance of $300 at the end of the introductory period and make $150 monthly payments, you'll have the card paid off in an extra three months and only spend $8 in interest fees.

Other options for financing a purchase

If you can pay in cash, this is often ideal -- either by saving up the money you need before making a purchase or by drawing from savings (or, if the expense is truly an emergency, from an emergency fund). Avoiding debt, especially high-interest credit card debt, is smart.

However, sometimes you simply don't have the money to cover a necessary expense. If you think you'll need more than 20 months to pay off the expense, you might want to look into other financing options.

When you finance a purchase with a loan, you want to shop around for the lowest interest rate possible. The best personal loans come with low interest rates for the most creditworthy borrowers. You can also look into low-interest credit cards -- some credit unions offer credit cards with interest rates that compete with personal loans.

If you plan ahead and do your research, you can find ways to limit the cost of borrowing money when you find yourself in a pinch.

Top credit card wipes out interest until 2023

If you have credit card debt, transferring it to this top balance transfer card secures you a 0% intro APR into 2023! Plus, you'll pay no annual fee. Those are just a few reasons why our experts rate this card as a top pick to help get control of your debt. Read our full review for free and apply in just 2 minutes.

About the Author