A “0% APR credit card” or a “zero percent credit card” does not necessarily mean that the card will never have an interest charge. Instead, it indicates that the card offers a 0% introductory rate for a set amount of time. The 0 percent rate may be used for transfers of balances, purchases, or both, although it typically isn’t for cash advances.
What Does An Interest Free Credit Card Mean?
The interest rate your credit card provider charges on whatever debt you have on your card is known as the annual percentage rate, or APR. Some credit cards have a single rate for all debt, while others impose several rates for various types of debt (purchases, cash advances, etc.). Your monthly credit card statement includes an APR breakdown.
The rate that big banks charge their best clients, known as the prime rate, is what issuers frequently set their rates at. Your rate, for instance, could be “prime + 12 points.” Your APR would be 17.5% if the prime rate were to be 5.5%. There are no credit cards with APRs that are lower than the prime rate, with the exception of promotional periods with 0% or extremely low “teaser” rates.
Despite being reported in annual terms, interest rates are often assessed on a daily basis. For instance, a daily rate of around 0.0535% would be equivalent to an annual rate of 19.25%. Therefore, you would spend around 54 cents a day in interest for every $1,000 in debt. That might not seem like much, but it actually adds up over the course of a month and a year.
How Does an Interest Free Credit Card Work?
You may be able to make purchases and debt transfers using a credit card that offers a 0% introductory APR for a specific amount of time. The duration varies depending on the issuer, but it typically lasts between 12 and 21 months.
Although you must still pay your balance in full each month, you won’t be charged interest for the first few months if you want to carry a balance over. However, keep in mind that after the intro period expires, the leftover balance will be charged interest at your new APR until it is paid in full.
The interest is not retroactive, which is good news. Therefore, if you have a $1,000 debt on your card when the introductory period expires, interest will be charged going forward.
As is frequently the case with no-interest transactions promoted by large retailers, you are not responsible for postponed interest. The bad news is that credit cards apply compound interest on balances, which means that if you keep revolving your balance, it will grow quickly.
How Do You Pick The Best Interest Free Card For You?
You may select the credit card that is the greatest fit for you now that you are aware of the advantages of 0% credit cards. Even if it may appear like a difficult effort, all you have to do is concentrate on the following:
Size of the offer: Offers with introductory zero interest rates on purchases and balance transfers typically last between 12 and 21 months. Be aware that certain credit cards offer a 0% interest rate on both purchases and balance transfers. Additionally, despite the fact that the lengths of the two intro periods can vary, certain cards will offer a 0% intro rate on both.
Fee for balance transfers: You may occasionally come across a deal that waives this charge. However, it often ranges from 3% to 5% of the entire amount transmitted. The total amount you must repay is then increased by the fee.
Annual fee: Some credit cards with 0% APR have no annual fees However, this fee is frequently assessed on credit cards with excellent benefits. Depending on the issuer, some will not charge you anything for the first year. If you’re selecting a credit card based on perks, make sure to take the annual fee into account.
Credit rating: People with decent to exceptional credit tend to receive the best credit card offers. Try to improve your credit score before applying for a 0% APR credit card to increase your options. Additionally, the reduced APR you’ll be given after the introductory period depends on your score.
Some Of The Best Interest Free Credit Cards
Wells Fargo Reflect® Card
If cardholders complete all of their minimum payments on time, the Wells Fargo Reflect card’s 18-month introductory APR on purchases and balance transfers can be extended by three more months. There is no annual fee and you have 120 days from the date of account opening to conduct balance transfers at the promotional APR.
Chase Freedom Unlimited
With the Chase Freedom Unlimited card, you can make purchases with no interest for 15 months. Get 5% cash back when booking travel through Chase Ultimate Rewards, 3% back while dining out and shopping at pharmacies, and 1.5% back on all other transactions.
Additionally, up to $12,000 in first-year spending can earn you 5% cash back on grocery store purchases (excluding Target® and Walmart® purchases). Additionally, the card offers a $200 bonus once you spend $500 within the first three months.
Discover it Cash Back
You can enjoy a 0% introductory APR on purchases and balance transfers with Discover it Cash Back for 15 months; after that, a variable APR between 14.24% and 25.24% will be in effect. Every other purchase will always receive 1% cash back. There is no yearly charge for cardholders, and at the end of the first year, Discover will double your cash back earnings.
Discover it Miles
Get a 0% introductory APR on purchases and balance transfers with the Discover it Miles card for 15 months; after that, a standard variable purchase APR of 14.24% to 25.24% will be in effect. The card offers good benefits as well. You’ll earn 1.5 miles for every dollar you spend, indefinitely.
Frequently Asked Questions
1) Is 0% APR good?
Ans. You might consolidate your debt or use a card with 0% APR to pay off a large expense. The card’s introductory period, which is typically between 12 and 21 months, is when the 0% APR is in effect.
2) What does “no interest card” mean?
Ans. With a credit card with a 0% APR, you won’t pay interest on purchases or, maybe, debt transfers throughout the promotional period. Remember that in order to prevent interest from accumulating, you must continue to make at least the minimum payments on your balance.
3) Who qualifies for the interest free credit cards?
Ans. The criteria for determining creditworthiness vary depending on the credit card company. Your credit card application, credit report, and credit score will all be reviewed by an issuer. When researching credit cards online, you may frequently find information about the required credit score range.