If your credit is decent, and you know where to look, a zero-interest credit card offers financial consumers some definitive advantages.
The fact is, a zero-interest credit card is worth pursuing, just based on the numbers alone.
In 2017, the current average credit card interest rate was 12.77%, according to a recent study by Credit Donkey. That rate level hasn't changed much since 2011 (at 12.74%), when Credit Donkey started tracking average credit card interest rates.
Still, a 12.77% card interest rate is more than enough to start getting financial consumers clamoring for zero-interest rate cards. Such cards allow cardholders to shift high-interest rate debt to a new zero-interest rate credit card - a card that doesn't charge an interest rate during a pre-defined introductory-rate period.
That could translate into big benefits for cardholders.
"A zero-rate introductory APR credit card could help you save on interest on a big purchase," explains Alexander Lowry, professor of finance at Gordon College. "Since these credit cards charge no interest for an introductory period, a zero-percent introductory APR card could also be a great way to pay down your debt without also paying on interest."
As always, with any potentially "too good to be true" personal financial scenarios, there are caveats with no-interest credit cards.
"Getting a zero-interest credit card is absolutely doable, but getting to the credit score that's required for these credit cards isn't always easy," notes Adrian Nazari, CEO and founder of Credit Sesame. "Typically, credit card issuers want to see either a good or excellent credit standing for you to be considered for approval."
If your credit is in good shape, follow these guidelines when attempting to land a zero-interest credit card:
Know your financial situation. The first step in getting a 0% intro APR credit card is checking your credit score to see where you stand, says Nazari. "If you're in the range of a good or excellent credit standing, then you can directly apply for the credit card with the issuer or by first comparing it on credit card marketplaces - where you can view and compare several credit cards at once side by side," he states. "It's always ideal to compare several credit cards to identify what various perks the different credit card companies tend to offer." Most credit platforms, such as Credit Sesame, allow card applicants to get pre-qualified, so you know which cards you qualify for to reduce the risk of rejection. "Getting pre-qualified for a credit offer also helps you to avoid having your credit score hit needlessly," Nazari adds.
Remove credit approval obstacles. There may be numerous roadblocks in getting the credit score you need to obtain a 0%-rate credit card, says Nazari. "For example, having a high credit utilization ratio, late payments on your credit report, or not having enough history on your credit accounts can all be roadblocks to attaining a high-enough credit score to be approved," he notes.
Know the difference between purchases and balance transfers. Many credit cards offer a promotional 0% interest rate on both purchases and balance transfers, but other cards may only offer 0% interest on balance transfers and still charge you interest on new purchases you make, says Tim Devaney, a credit card specialist at Credit Karma. "Consequently, make sure you read the fine print and know what you'll be charged before you start using the card," he advises.
Watch out for the balance transfer fee. Just because a balance transfer card offers a promotional 0% interest rate doesn't mean it's free. "Most of the time, you'll have to pay a one-time balance transfer fee," Devaney adds. "Make sure you factor that into your costs."
Don't procrastinate. You may have only a limited time to opt-in to a credit card's promotional 0% interest rate, so act fast, Devaney says.
Don't spend more than you can afford to pay off each month. When you get a zero-interest credit card, use it sparingly. "Balance transfer credit cards are a great way to pay off pre-existing debt from other credit cards, but don't make the mistake of racking up more debt by making new purchases you can't afford to pay off each month," says Devaney.
What credit card companies offer the best deals on zero interest cards? Start with cards that offer longer introductory periods.
"The Chase Freedom credit card gives you 0% intro APR for 15 months and provides great cash back rewards," says Nazari. "The Discover it Card also provides 0% intro APR, but for 18 months, and has a cash back rewards program as well."
No doubt, a zero-interest rate credit card offers financial consumers some intriguing options. Leverage the tips listed above and cut the best deal you can on a 0%-rate card today.