What does 0% APR mean?

Nobody wants to pay more than they have to, especially when it comes to credit card interest. And if you have a credit card with a 0% promotional APR, you may not have to.

But how exactly does a 0% promotional APR work? And what are the pros and cons? Find out the answers to these questions and more.

Key takeaways

  • With a 0% promotional or introductory APR, qualifying transactions won’t accrue any interest during the promotional period as long as all credit card terms and conditions are met. 
  • Promotional APRs have to last at least six months. And they may last even longer. 
  • Missed or late payments could trigger a higher penalty APR and may cause a 0% promotional period to end.
  • Promotional APR offers are different from deferred interest offers. With deferred interest offers, interest accrues the entire time but is deferred until a stated offer end date.

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How does 0% APR work?

A 0% APR means that there’s no interest on certain transactions during a certain period of time. When it comes to credit cards, 0% APR is often associated with the introductory rate that may be available when you open a new account. 

A 0% promotional APR may apply to a card’s purchase APR, balance transfer APR or both. It depends on the offer. 

For example, if your card offers a 0% promotional APR for both qualifying purchases and balance transfers, you won’t have to pay any interest on qualifying purchases or balance transfers during the promotional period.

How do you qualify for 0% APR?

According to the Consumer Financial Protection Bureau (CFPB), “Credit card companies typically offer their best rates to customers who have the highest credit scores.” But each card issuer has its own criteria for creditworthiness

If you’re curious about how you can work toward an excellent credit score, check out these tips to improve your credit score.

If you want to see if you’re approved for a card before applying, consider getting pre-approved or pre-qualifying. You can find out whether you’re pre-approved for Capital One credit cards before you submit an application. It’s quick and only requires some basic info. Checking it won’t affect your credit scores, because it only requires a soft inquiry.

What happens when 0% APR ends?

0% promotional APRs are for a limited time—they don’t last forever. Promotional APR periods must last at least six months. But they can be even longer.

A card’s standard APR will apply when the promotional APR period ends. And if you’re carrying a balance on the card, you’ll start to see the card’s standard rate—typically a variable APR—applied to the balance.

What are the pros and cons of 0% APR?

It’s important to understand the potential pros and cons of low introductory APR offers—especially if you’re using a low APR credit card as a tool to help improve your finances.

Pros of 0% APR

  • Pay no interest: If you meet the terms of the offer, you won’t be charged interest during the promotional period.
  • Pay down debt faster: If you transfer a balance from a credit card with a higher interest rate to one with a 0% promotional APR, you won’t be charged any interest during the promotional period. And that could mean that the debt gets paid off faster.
  • Pay for large purchases over time: You can pay for big-ticket items over time—potentially without paying any interest at all—instead of paying the entire cost upfront.

Cons of 0% APR

  • 0% APR is only temporary: 0% APR only lasts for a limited time. The card’s standard rate will apply once the promotional period ends.
  • 0% APR may not apply to everything: Some transactions—like cash advances—may still accrue interest during the promotional period.
  • Fees: Just because there’s no interest doesn’t mean there are no fees related to an offer. Some cards might charge a balance transfer fee, for example.
  • Penalty APR: Monthly minimum payments must be paid during the promotional period. A late or missed payment might end the 0% APR offer. And there may be a penalty APR after a late or missed payment, which is typically higher than the standard APR that kicks in after the promotional period.

0% promotional APR vs. deferred interest

A 0% promotional APR offer isn’t the same as a deferred interest offer.

With a deferred interest offer, interest accrues, but it’s delayed until a stated offer end date. That means that when a deferred interest offer ends, your standard interest rate will apply. 

But with deferred interest, the card’s standard interest rate won’t apply to just the remaining balance. As the CFPB explains, “If you do not pay off the entire balance of the promotional purchase you’ve made on your card, then interest going back to the date of the purchase will be added on top of the remaining balance.”

Spotting the difference between 0% APR and deferred interest

If a card has an unpaid balance after the promotional APR offer period ends, that balance will only start accruing interest starting from the day the promotional period ends—as long as the cardholder has met all the terms and conditions of the offer along the way. 

But deferred interest offers work differently. As the CFPB explains, “Deferred interest offers use language like ‘No interest if paid in full within 12 months.’ The ‘if’ means you could end up paying more than you expected.” 

Not meeting the payment terms of a deferred interest offer can make a purchase cost much more than it would if it were paid off during the promotional period. That’s because all of the interest will be applied back to the purchase date. 

0% APR in a nutshell

Credit card offers with 0% APR may catch your eye with their promises of no interest. And depending on the card, the promotional APR may be for certain purchases, balance transfers or both. But it’s still important to do some homework so you’ll know exactly what to expect during and after the promotional period.

Ready to explore some options? Check out Capital One’s low intro rate credit cards.

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