By Jessa Barron, NextAdvisor.com
Whether you’re looking to complete a balance transfer or you want some time to pay off a purchase interest-free, a low APR credit card is a great option to consider. While these credit cards offer generous periods of 0% intro APR, meaning you won’t be charged interest for a certain period of time, there are many misconceptions floating around about 0% intro APR periods and how they work and function. To help you understand what you’ll get with a 0% intro APR card, we’re debunking five 0% intro APR myths.
0% intro APRs last forever
When a credit card offers a 0% intro APR period, the offer is exactly that — an introductory period of time when you’ll pay no interest. How long your introductory period lasts depends on the card you select, as some offer 15 months of no interest, while others offer 18 months or even up to 21 months of no interest. Once the 0% intro APR period is up, so is your 0% APR, which means you’ll be responsible for paying interest on any balance you are carrying. The interest you’re charged after the 0% intro APR is over will be determined by your creditworthiness when you apply for the card. Something to note is that major credit cards have variable interest rates (e.g., 11.24% to 23.24% variable), which means your rates may increase when the Fed increases interest rates. As such, it’s important that you not only pick a card with a long enough 0% intro APR period for you to pay off any balance you plan to transfer over or accumulate, but also understand what your APR will be after the 0% intro APR expires.
You must pay back interest once your 0% intro APR runs out
It’s a common misconception that once your 0% intro APR expires, you’ll have to pay back interest for all the months you enjoyed interest-free bills, or that you’ll have to pay back interest if you carry past the 0% intro APR period. Because your 0% intro APR doesn’t last forever, you will eventually have to pay interest on your credit card if you carry a balance after the 0% intro APR is up, but you will not be charged any back interest to make up for the 0% intro APR period. For example, if your card’s 12-month 0% intro APR runs out and you have a $200 balance at the time, you will be charged interest on that $200 balance starting at month 13. This is true for most major credit cards, including the ones we review, although you should know that some credit cards, like store cards, do charge back interest if a balance isn’t paid off before the 0% intro APR expires — this will be detailed in the card’s terms and conditions. You’re probably wondering why credit cards provide 0% intro APR periods if they won’t make money off of back interest. We’ve detailed this before, but essentially credit cards offer 0% intro APR periods to encourage new customers to apply. That’s why 0% intro APR offers usually don’t extend to current cardholders.
You will keep the 0% intro APR no matter what
Although your 0% intro APR does have an expiration date and you are pretty much guaranteed to keep your 0% APR until that date, there are a few instances where you could risk losing your 0% intro APR. For example, if you fail to make the minimum payment each month or you’re late on a payment, you could be at risk of losing your 0% intro APR. While making a late payment doesn’t necessarily mean your 0% intro APR offer will be canceled immediately, as this is subject to your credit card issuer, even one late or missed payment could put it at risk. This is why it’s extremely important for you to at least make the minimum payments on your credit card bills, if you can’t pay them in full each month, at least make sure that you’re paying the minimum payment on time, as having late payments negatively impact your credit scores is even more detrimental than losing your 0% intro APR.
All 0% intro APRs apply to both purchases and balance transfers
While there are credit cards that offer 0% intro APRs for both purchases and balance transfers, a large number of them extend their intro APRs to one or the other. To ensure you are signing up for the right cardfor your needs, you’ll want to make sure you read your credit card’s terms and conditions before applying — or look through these details noted in our credit card reviews. After all, it won’t be helpful to sign up for a card that only offers a 0% intro APR on purchases if you’re planning to complete a balance transfer. Need some help? Check out our low APR credit card reviews to find the right card for your needs.
0% intro APR cards always have hidden fees
A lot of consumers believe that credit card issuers will sneak in hidden fees to make up for the fact that new cardholders are getting an extended period of time with no interest. While those who transfer a balance may need to pay a balance transfer fee (usually 3% to 5% of the total), all major credit cards spell out the terms so they really aren’t hidden. In fact, most of the low APR credit cards we review have no annual fees. If you’re considering a card and want to confirm there will be no surprises, you’ll want to be sure to read through the card’s terms and conditions agreement — note that this may also be called pricing and information or rates and fees — as any fees associated with the card will be listed there.
Now that you know the truth about 0% intro APRs, you may want to start looking for the card that offers the perfect 0% intro APR period for you. You can read more about 0% intro APR credit cards and the other perks these card offer by visiting our reviews of best low APR credit cards.
This blog post originally appeared on NextAdvisor.com.