What Does 0% Apr For 15 Months Mean
If your new credit card offers a 0% APR for 15 months, this means that for 15 months, you can charge for purchases totaling up to the amount of your credit limit without paying any interest on your balance, even if you dont pay it off from month to month.
After the 15 months, whatever balance is not paid off will be charged your normal APR, which can be anywhere from 14 to 28% depending on your credit card company and your credit score.
Lets say that you purchased a new living room set for $4,000 and paid it off during your promotional period in $267 monthly payments. By your 14th month, your balance will be around $267 .
But, hypothetically, if you were to forget to pay off the remaining $267, then once your promotional period is over, you will be charged 1/12th of your normal APR in interest for the remaining balance until it is paid off.
How Do 0% Purchase Credit Cards Work
A 0% interest credit card has a set period where no interest is charged on the balance built up on the card with new purchases. This period usually begins from the moment you get the card.
The length of the 0% period is usually measured in months even for the cards that charge no interest for more than a year.
As well as 0% periods of as long as 21 months, several cards come with additional perks – letting you build up things like nectar or Clubcard points, airmiles, get free use of executive lounges in airports and more.
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You Might Not Qualify For A 0% Apr Card
If you’re looking to open a 0% APR card, check your credit score first. Introductory no-interest credit cards typically require good credit or excellent credit .
If your score falls in the fair and average credit range or bad credit range , you may have trouble qualifying for a 0% APR card. Some cards for people with less than stellar credit may still offer 0% APRs, but the intro period will typically be shorter than cards for good or excellent credit.
If you fall into this category, consider alternative debt-payoff options, such as personal loans, that may have more lenient credit requirements and generally lower interest.
What Does Variable Apr Mean
If an ,;then it can;change over time. With some loans, you know exactly how much youll pay in interest: you know how much youll borrow, how long youll take to pay it back, and what interest rate is used for interest charges. Loans with a variable APR are different. The interest rate might be higher or lower in the future than it is today.
Variable-rate loans are risky because you might;think;you can afford to borrow given todays rate, but you may end up paying a lot more than you expected. On the other hand, youll typically get a lower initial interest rate if youre willing to assume the risks of using a variable APR. In some cases, variable APRs are the only option availabletake it or leave it.
What might make your interest rate increase? Variable APRs typically rise when interest rates in general rise. In other words, they rise with interest rates on savings accounts and other types of loans. But your interest rate can also increase as part of a penalty . If you fail to make payments, for example, your rates can jump dramatically.
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What Is Apr On A Credit Card
APR should be advertised on all borrowing products, from;;and loans to mortgages.
As part of industry regulations,;all lenders calculate APR the same way. To make it easier to compare loan products, APR takes into account any additional fees and how often you’re charged interest.
Our repayment calculator shows you:
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The total cost of your credit card
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How much interest you’ll pay on the debt
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How quickly you could clear the balance by changing your monthly repayment amount
How To Avoid Paying Interest On A 0% Apr Credit Card
Even if you have a 0% APR offer on a credit card, you may need to plan ahead to avoid paying interest.
If your card offers a 0% APR on balance transfers and purchases for the same promotional period, figure out how much you’ll need to pay each month to pay off the full balance by the end of the promotional period. Otherwise, any remaining balance will start accruing interest at the standard rate once the promotional period ends.
If your card offers a 0% APR on balance transfers but not purchases, interest could start accruing immediately if you make purchases with the card you used for the balance transfer. In general, it’s best to use your balance transfer card solely to pay off the amount you transferred and use other methods of payment for new purchases. The same goes for cash advances, which should always be avoided if possible.
Additionally, with some credit cards , all the interest that would have accrued during the promotional period may get added to your balance if you don’t pay off the card’s entire balance by the end of the promotional period. While it’s always best to have a plan for paying off your balance before the promotional period ends, it’s especially important with cards that have this type of deferred interest arrangement.
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What Does 0% Apr Mean And How Does It Work
So, what does 0% APR mean? It means it is a free way to borrow peoples money, for a set amount of time.
You see 0% APR offers all the time the opportunity to pay no interest when you finance furniture, appliances, home improvement supplies and, quite often, any purchase you make on a new credit card.
Perhaps youre curious: How do 0% APR offers work? How can banks offer them? Is interest-free financing too good to be true? A scam?
Here, well explain why 0% APR offers exist, how they work, and how you can use them to make it easier to afford a large purchase or simply to put more money in your pocket.
Pay At Least The Set Monthly Minimum And Stick Within The Credit Limit Or You May Lose The 0% Rate
Set up a direct debit for at least the minimum repayment as soon as you’re accepted. Even though you pay 0% interest, you still need to make repayments each month.
If you miss one you may lose your 0% deal and get a £12ish charge. It may also be added as a missed payment on your credit report.
You’ll also need to be careful not to spend more than your credit limit. If you do, the card provider may end the 0% offer, which means you’ll start paying interest.
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A Balance Transfer Can Carry A Fee Of Up To 5% Of The Total
When you transfer a balance from one card to the other, you can end up paying up a fee of up to 5% of the entire transfer. Therefore, if you transfer $8,000 and the fee is 5%, youll pay an additional $400. Some cards offer lower introductory fees if you transfer within a specific period, though. Make sure you know how much the transfer itself will cost you before you apply for the card to verify that it will be worth your money.
Are There Any Rewards Cards With 0% Intro Aprs
If you have a good credit history and solid credit scores, youll probably qualify for the best rewards cards, many of which do offer 0% introductory APR deals. Depending on the bonus categories that matter most to you, you can choose travel credit cards;or cards that offer cash back;on gas station, grocery store, and wholesale club purchases, and even discounts at department stores and other retailers.
Some, like the Blue Cash Everyday, may even save you money on your internet, TV, and cell phone bills.
Its important to remember that some cards limit the dollar amount of purchases eligible for cash rewards, either annually or by the quarter.
The Blue Cash Everyday card pays 3% cash rewards at U.S. supermarkets on up to $6,000 in purchases per year, then reduces to 1% cash back. Another cash rewards credit card may offer 3% cash back up to a $1,500 quarterly maximum.
They sound like the same deal, since $1,500 x 4 = $6,000, but they wont always work out the same in real life. If you consistently spent $500 a month at the grocery store there would be no difference, and youd get the same cash back whether your card had annual or quarterly limits.
In contrast to all that, the Wells Fargo Cash Wise Visa® card ;has no limit on rewards it pays 1.5% cash back on every purchase.
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Unless You Buy Something Else On That Card
Lets say you need to spend $150 on groceries during a routine shopping trip, and you charge it to your new cardthe same card to which youve transferred the balance.
You assume that if you pay off the $150 when your bill comes due in three weeks, then you wont owe any interest on the purchaseafter all, you just made it. And you know youll have the money because your financial situation has improved since you moved that $5,000 balance. You were unemployed then; you have a job now and youre not taking on new debt, just cleaning up the past. You just charged the purchase to your card for convenience.
But when your credit card statement arrives, you find youve been charged 15% APRthe new cards interest rate on purchaseson your $150 grocery shopping. Its a small amount, but what if you had charged your childs college tuition for the semester? Plus, theres the principle of the thing: If youre going to pay interest or fees to a credit card company, then you want to do it knowingly, not because the company caught you off guard.
Amex Everyday Credit Card
The Amex EveryDay® Credit Card also has a $0 annual fee and features an introductory 0% APR on purchases for 15 months. The variable purchase APR jumps to 12.99% – 23.99% after the intro period is up.
If you use your card at least 20 times or more on separate purchases in a billing period, you could earn 20% more points for those purchases . Youll also earn 10,000 Membership Rewards® points if you make at least $1,000 worth in purchases within the first 3 months of account opening.
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You Can Lose A Purchase Apr Offer
If you dont make your monthly minimum payment by the due date on your statement each month, its possible to lose the introductory purchase APR. You could also lose the promotional rate for some intro purchase APR offers if for example you go over your cards credit limit, make a late payment or break other card terms.
The Difference Between A 0% Intro Period And Deferred Interest
Deferred interest;credit cards bear some similarities to introductory 0% APR credit cards, but theyre not as advantageous. Interest isnt added to a balance during the promotional time period with a deferred interest arrangement, but you have to pay the balance in full before the deal expires.
If you dont, and theres a debt left over, all of the interest youve accrued will be added to the balance. So, if you charged $5,000 and have $1,000 remaining, interest will be calculated on the $5,000 and added to what you owe.
Conversely, with an introductory rate credit card, any balance you have left over after the promotional period ends is subject to the real rate of interest, but you wont be charged for anything that preceded it.
That means if you charged $5,000 and still owe $1,000 when the introductory rate ends, interest will be applied to that debt only. The $4,000 you already satisfied was an interest-free loan.
Clearly, deferred interest credit cards are riskier than those offering introductory rate APRs. But in both cases, its important to manage your financial affairs so youre out of debt before interest kicks in.
0% introductory APR cards are ideal for one-time, big-ticket items not when you cant afford to meet your expenses.
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Can 0% Purchase Cards Be Used For Balance Transfers
With many 0% purchase cards, you wont be able to transfer a balance. However, you may find a small number that do, although there are usually strings attached, such as interest payments and balance transfer fees being introduced.;;If youre looking for a balance transfer, you should look at dedicated balance transfer credit cards. These can be available with 0% interest and can help you consolidate debt and reduce the interest you need to pay on outstanding debts, making it easier to pay off your balance.;;Both types of credit cards can be useful for balance transfers, so its worth looking at which you could be eligible for. If youre looking for something that will do both, there are some credit cards that offer 0% on both purchases and balance transfers.
Dont Expect Rewards On A 0% Transfer Offer
Although there are cards that offer rewards and 0% APR, its unlikely youll find a card that will let you earn rewards on a transferred balance.;Typically rewards are only earned on new purchases. The rare exception is the Priceline Visa Card, which offers up to 5,000 bonus points on balance transfers completed in the first 30 days you have the card.
If you have credit card debt, its not a good idea to be focused on rewards, anyway. According to the Federal Reserve, the average APR charged in the fourth quarter of 2019 for credit card accounts that incurred interest was 16.88%. Credit card rewards, by comparison, typically offer anywhere between 1% to 6% back on the amount of your purchase. The cost of interest charges will quickly outweigh the value of rewards earned.
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A Transfer Can Save You Money
Say you have a $5,000 balance on a credit card with a 20% annual percentage rate . Carrying that balance is costing you $1,000 a year in interest. If you get a 0% balance transfer offer on a new credit card, with a one-year promotional period, then you can move your $5,000 balance to the new card and will have a whole year to pay it off with no interest. The balance transfer fee in this case is 3%, which amounts to $150.
Even after the fee, youll come out way ahead by not paying interest for a year, as long as you put about $415 per month toward your $5,000 balance so that its paid in full by the end of the promotional period.
Dont Give Up On Credit Cards Altogether
When used responsibly, credit cards can be a fantastic financial tool. They can help put your money to work for you and yes, even land you on some fabulous-looking beach wearing white well after Labor Day.
Just dont forget: Credit card companies are running a business, and theyre banking on you going into debt to earn their keep.
So dont be afraid to take advantage of their offers while avoiding putting extra money in their pockets. After all, theyre certainly not afraid to take advantage of you.
About the Author:Jamie Cattanach has written for The Penny Hoarder, VinePair, SELF, Ms. Magazine, Roads & Kingdoms, The Write Life, Barclaycards Travel Blog, Santander Banks Prosper and Thrive, and other outlets. Her writing focuses on food, wine, travel and frugality.
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What Is 0% Apr
A 0% APR credit card is one that does not charge interest for a temporary period, says Brian Walsh, CFP, senior manager of financial planning at SoFi. Sometimes this applies to purchases, sometimes it applies to balance transfers, and sometimes it applies to both.
You may find these offers on different types of credit cards. Many of our favorite cash back cards, for instance, offer 12 to 15 months of intro 0% APR on new purchases. But youll find the longest introductory offers on cards specifically marketed for their introductory period. These cards typically dont come with high-value long-term rewards or other benefits, but do have 0% APR periods totaling 15 to 18 months. The U.S. Bank Visa Platinum Card has one of the longest intro APR periods available today, offering 0% interest on both new purchases and balance transfers for 20 billing cycles.
When you sign up for a card with an introductory 0% APR, make sure you understand exactly which type of charge the offer covers and how the offer aligns with your financial goals. A 0% APR on new purchases can be helpful for paying down a large, upcoming purchase over time. An introductory 0% interest offer on balance transfers, however, is more suited for paying down existing credit card debt you may have accrued on another card. Under either type of 0% APR offer, you wont take on any interest as long as you pay off your balance by the end of the promotional period.;