What Happens When Your 0% APR Period Ends?

Comparing features and options when applying for a new credit card is often a complex decision, but one appealing benefit that can impact a cardholder’s decision-making is a period of introductory 0% APR (Annual Percentage Rate). The 0% intro APR is a promotional interest rate typically offered to new credit card customers. It can apply to regular purchases, balance transfers or both. Once the introductory period ends, the variable APR for purchases and/or balance transfers applies to any unpaid balance. 0% intro APRs last for a set period of time anywhere from six months to well over a year (the exact period is determined by the credit card issuer).

What Is 0% Intro APR?

A 0% intro APR on purchases means that day-to-day purchases will not be charged interest for a set period of time as long as the cardholder pays their bill on time each billing cycle—even if the cardholder doesn’t pay off their full balance by the end of each billing cycle. For example, the Blue Cash Everyday® Card from American Express offers 0% intro APR for 15 months on purchases and on balance transfers requested within 60 days of account opening, followed by a variable APR of 19.24%-29.99%. A balance transfer fee of $5 or 3%, whichever is greater, applies (Terms Apply. See rates & fees).

A 0% intro APR on balance transfers means a new cardholder can transfer existing debt from a credit card to the new card and enjoy no interest while making payments. Typically a one-time balance transfer fee of 3% to 5% is charged, but sometimes a relatively small fee is worth avoiding paying high interest rates on balances about to accrue or actively accruing interest. The Citi® Diamond Preferred® Card, for example, offers a 0% intro APR for 21 months on eligible balance transfers from date of first transfer and 0% intro APR for 12 months on purchases from date of account opening. After that, the variable APR will be 18.24% - 28.99%. Balance transfers must be completed within 4 months of account opening. A balance transfer fee of either $5 or 5% of the amount of each transfer, whichever is greater, applies.

What Happens When the 0% Intro APR Period Ends?

When a new card’s introductory period is over, a variable APR will apply to any unpaid balance. The APR for purchases and balance transfers varies per issuer and can depend on the cardholder’s credit history. The current rates for any credit card can be found in the card agreement or by calling the number on the back of the card.

If there’s still a balance by the end of the intro period, consider these options:

• Apply for a new card with 0% intro APR. If maintaining a 0% interest rate is important, then it may be possible to apply and be approved for a new credit card that offers another 0% intro APR period. The cardholder can transfer the balance to the new card before the prior card’s intro period ends. That way, the cardholder can continue to pay down the balance without high interest rates. Note that if it’s frequently troublesome to pay off a high balance, this is not recommended.
• Pay off the remaining balance in a lump sum. The cardholder can opt to use savings or other cash to pay off the remaining balance and avoid interest.
• Let the period end. Once the intro period ends, interest will be applied to the unpaid balance. The cardholder can make payments as normal to pay it off.

If the cardholder can pay off an entire balance before the intro period ends, there are a few options:

• Tuck the card away. Once the entire balance is paid off, it’s sometimes better to put the card away. Having a zero balance on a credit card can boost the cardholder’s credit score over time as it helps keep credit utilization low.
• Close the credit card account. If the card has served its purpose, the credit card account can be closed. This could lead to a decreased credit score if it means that the cardholder’s average age of accounts or credit utilization rate increases once the account is closed. If the card has no annual fee, there’s little harm in keeping it open (if you can resist charging it up again) and it could even help your credit score go up.
• Take advantage of other rewards. Take a look at the credit card’s other rewards or benefits. For example, if the card offers car rental insurance, it can be a good option to use while traveling.

Remember that paying your balance in full every month on a credit card remains the best way to avoid paying any interest at all.

Advantages to 0% Intro APR

Consider these benefits when applying for a new credit card that offers 0% interest for any period of time:

• Make a large one-time purchase and pay it off over time. When shopping for an expensive item like a major appliance or TV, the option to pay the balance off over time can make it more affordable. A credit card with 0% APR allows the purchaser to do so and, with diligent payment, pay zero interest before the introductory period expires.
• Pay off other credit card debts. Introductory periods with zero interest provide additional time for the cardholder to pay off older debt. Cardholders can do this by transferring the balance from a card with high interest to a new card with 0% intro APR. Card issuers typically charge a small one-time fee that’s added to the new balance, but it’s often a small price to pay compared to high interest rates. Just be sure your 0% intro APR period specifically includes balance transfers.
• Pay down other big bills. If you have outstanding debt, such as with a contractor, attorney or other service provider, ask if they’ll accept credit cards as payment. Then you can pay off your credit card balance over time without interest. There may be a processing fee, but it could be worthwhile to get a big invoice off your plate and spread out payments for later.

Disadvantages to 0% Intro APR

If cardholders are not careful to pay off charges by the end of the introductory period, they could end up paying more in interest. Make sure to review all the terms of a new card before applying and consider these disadvantages if an aggressive payment plan is not established:

• Interest on purchases will accrue at the end of the introductory period. If the card is used to make a large one-time purchase, be sure to pay off the entire balance before the variable APR is applied to purchases. Otherwise, unwanted interest charges will make initial purchases much more expensive.
• Interest on balance transfers will be applied to the unpaid balance. Balance transfer APRs often differ from purchase APRs. These rates could even be higher than the purchase APR from the former card that the balance was transferred from. This means the cardholder may end up paying more in interest than bargained for if they don’t pay off the entire balance in time.

Bottom Line

Introductory 0% APR periods are beneficial for many cardholders but they do come with some risk. Make sure to research the terms and conditions before applying for any credit card. Whether doing a balance transfer or preparing for a large purchase, it’s important to know whether it’s possible to pay off the entire balance before the intro period ends and what will happen once interest starts to accrue. Have a plan for making payments on time to avoid unwanted fees.

To view rates and fees for Blue Cash Everyday® Card from American Express please visit this page.