What does 0% APR mean for credit cards?

A 0% APR, or annual percentage rate, means that there is no interest on a credit card balance for a certain period of time, which typically ranges from a few billing cycles to up to 15 months of billing cycles. Credit card companies use it as a promotional offer to attract potential customers.

About 0% APR credit cards

The annual percentage rate (APR) is the yearly interest you pay on a credit card.

A 0% APR credit card charges no interest for an introductory period on purchases, balance transfers, or both. However, although no interest payments are required during the introductory period, the interest charges will begin to accrue after that period ends, and these can be substantial.

With 0% APR credit cards, it’s particularly important to make your payments on time because a late or missed usually triggers an end to the 0% APR period.

If this happens, you start being charged the normal variable interest rate on the balance.

‍How do 0% APR credit cards work?

The 0% APR rate applies to one or both of the following:

• Purchases: New purchases made during the introductory 12 to 20 months aren't charged interest. This is useful for individuals or small businesses that need to finance a large expenditure, but which expect to be able to pay it off during the introductory period.
• Balance transfers: Individuals and businesses can transfer balances from high interest rate credit cards to a new 0% APR card and, by eliminating the interest charge during the introductory period of time, they're able to pay those balances down more rapidly.

A business founder who needs to finance one or more large upfront purchases to establish or expand a company could find a 0% APR card useful, as long as they expect the purchase to generate enough revenue to pay down the balance before the introductory period ends. This requires some careful financial planning.

Alternatively, business owners might consider the Ramp Business Credit Card, which requires full balance payments monthly, eliminating interest accrual altogether. It offers higher credit limits based on your cash balance, simplifying financial planning.

Discover Ramp's corporate card for modern finance

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0% APR credit card use example

For example, a retail entrepreneur who needs to order $20,000 worth of inventory to stock a new store would have to pay an additional $3,888 in interest for one year using a card with an interest rate of 19.44%.

To avoid paying interest, the entrepreneur uses a 0% APR corporate card with a 12-month introductory rate. They’re able to pay off the entire amount during the introductory period, leading to nearly $4,000 saved. To pay off the balance, the business remits $1,667 per month to the credit card bill ($20,000 divided by 12 months).

However, if the business owner only pays the minimum on the card during the introductory period—2%—they'll be stuck with nearly $16,000 of outstanding debt at the end of the 12 months no-interest-period. Expect interest charges on promotional balances. The remaining balance would then be subject to the 19.44% interest rate.

Balance transfers can yield even more profound savings. If that business owner already has $20,000 of debt on a card that charges 19.44% in interest, they can use a balance transfer offer to eliminate $3,888 in interest expense over a one-year introductory period.

The benefits of 0% APR credit cards

The most obvious benefit is the ability to make purchases or transfer balances without incurring interest charges during the promotional period. This allows you to spread out payments without added costs. And by avoiding interest charges, you can free up cash to invest in other areas of your business or handle unexpected expenses.

As such, the best 0% APR credit cards are ideal for financing large purchases, such as equipment, inventory, or supplies.

0% APR balance transfer cards can also be a powerful tool for consolidating high-interest debt when transferring balances from other cards with higher interest rates.

Some online tools can help you determine how much you can save under different scenarios, such as different post-introduction-period interest rates and the minimum payments you decide to make.

What happens after 0% APR ends?

Normal 0% APR cards start charging interest when the promotional period ends on the remaining balance. They can also begin charging interest If you miss or are late with a payment.

0% APR vs. deferred interest

Credit cards with deferred interest are another type of card that is less forgiving. Deferred APR cards accrue interest during the entire promotional period, and if you do not pay them off in full, they bill you for it when the introductory period ends.

These are mostly store cards issued by retailers, and are usually easy to spot and avoid.

What is a good credit score for 0% APR?

These cards are available only to those individuals with good credit or excellent credit—that is, a FICO score of 670 or higher.

The card issuers are, after all, taking a bigger market risk in terms of the potential revenue from these products, which they try to offset by taking less credit risk by issuing only to qualifying borrowers with strong credit histories.

Considerations before applying for 0% APR credit cards

Understand card issuers’ motives

The credit card companies that issue these cards, and encourage you to transfer balances from other lenders, are not in the business of giving away free money. It's important to recognize their motives.

• First, they have crunched the numbers and know from historical experience across business cycles that enough borrowers will either miss a payment, triggering the imposition of often-punishing variable interest rates, or will fail to pay the credit card debt off by the end of the intro period, leaving the card issuer with a lucrative source of interest revenue.
• Second, the fees they often charge help defer losses on those accounts that do pay off their entire balances in time.
• Third, they charge transaction fees, called interchange fees, to vendors every time someone uses their card, further eroding any losses on accounts that are paid off in time.
• Fourth, the net interest margins banks garner—which is the difference between banks’ low single-digit borrowing costs and the eye-popping rates they charge borrowers—are so lucrative that any marketing ploy that brings in new clients is considered a win.

Having a 0% APR does not mean its a 0% interest credit card

It's important to know when your introductory 0% APR deal will end so you can plan to have the balance paid off—or paid down to a manageable level.

Once the interest free period is over, the card will switch to a variable interest rate which, depending on your credit score, can be painfully high.

You should consider three other factors when determining which card results in the most savings:

• Balance transfer fees: Credit card issuers often charge a balance transfer fee, which can be as high as 5%.
• Annual fees: Some cards charge an annual fee, which the cardholder should consider when determining which deal is most advantageous.
• 0% APR period length: A card’s 0% purchase APR period is often different, and shorter, than the promotional period for balance transfer credit cards. This should be kept in mind to avoid accidentally paying interest at a high variable rate on purchases.

Potential credit score impacts

These cards also affect your credit score. The credit card issuer will pull your credit record when you apply, which causes your score to fall slightly. It should recover rapidly, though. However, if the amount you charge, as a percentage of your total credit capacity—what's called your credit utilization number—goes up significantly, it will harm your credit rating. A credit utilization figure under 30% is considered best for maintaining a healthy credit rating.

Finally, some cards mix 0% APRs on new purchases and transfers with various types of rewards, such as airline miles. However, the rewards on transfers aren't usually significant enough to warrant making them a significant factor in your choice of card.

Best 0% APR credit cards

Here’s a short list of some of the best credit cards with 0% APR to consider.

• U.S. Bank Business Platinum Card
• The Blue Business Plus Credit Card from American Express
• Chase Ink Business Cash Credit Card
• State Farm Business Cash Rewards Visa Signature Card
• Bank of America Business Advantage Customized Cash Rewards Mastercard credit card
• Chase Freedom Unlimited
• Capital One Savor Cash Rewards Credit Card

Use your credit card for interest-free loans

A 0% APR credit card can double as an interest-free business loan, essentially. To do this, invest the proceeds of the debt you take on in revenue-producing activities that will generate enough cash flow to pay off the card within the introductory period.

Divide the amount you borrow by the number of months in the introductory period and ensure you can pay that amount each month.

In the example above, paying $1,667 each month on a $20,000 credit card balance with a 12-month 0% introductory offer rate and a 19.44% variable APR rate thereafter saves the entrepreneur a minimum of $3,888 in interest expense on the initial borrowing.

Remember these important caveats:

• Late or missed payments usually trigger an end to the 0% APR promotional rate, so you need to be confident that your use of the proceeds from the borrowing will generate enough revenue to cover the monthly payments, or that your other resources are adequate to do so.
• Scrutinize the card agreement to ensure you understand all fees, including annual fees and balance transfer fees, which can be significant.
• Borrowing more than 30% of your credit utilization figure—that is, more than 30% of all the credit you have at your disposal—will damage your credit rating. So, to charge $20,000 without hurting your credit would require about $67,000 in credit capacity among all your cards and other sources of debt financing.

Savvy users of 0% APR cards can avoid the twin risks of triggering the variable rate and breaching the credit utilization ceiling by daisy-chaining balance transfer offers before the end of the cards’ introductory periods.

Remember to always pay one card off with the proceeds from another, or your business could find itself flirting with poor financial performance or even insolvency.

How to extend no interest on a credit card

Unfortunately, you generally cannot directly extend the 0% APR period on an existing credit card. Credit card issuers set these promotional periods with specific end dates, and they rarely offer extensions.

Instead, many users opt to do a balance transfer to a new 0% APR card. Before your current 0% APR period expires, apply for a new credit card that offers a 0% APR balance transfer promotion. If approved, transfer the remaining balance from your current card to the new one.

This essentially gives you a new promotional period. Though be wary of balance transfer fees, which can range from 3% to 5% of the transferred amount.

Get 0% APR and no annual fees with a Ramp Business Credit Card

Ramp is a corporate business credit card that leverages AI to analyze where your money is going and how you can cut down on unnecessary spending. Legacy cards can’t compare in terms of spend management features that save your business money.

B‍ecause Ramp requires full balance payments every month, there's never any remaining balance accruing interest.

Cards come with built-in expense management software and up to 30 times higher credit limits than traditional issuers—all without a credit check. Instead, Ramp determines business credit card limits based on your company’s cash balance, or the drawable reserves in the bank accounts that your company has linked to Ramp.

Learn more about how Ramp can help you scale your business.