What Does 0% APR Mean?
When you have a credit card with a "0% APR," it means your annual percentage rate is zero, and you can save quite a bit of money by moving a high-interest balance to a card that doesn't charge interest. The higher the interest rate, the more you pay in finance charges. A 0% APR is usually a temporary offer used to attract new customers, and it is usually followed by a larger rate.
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Introductory Offer
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Many credit-card companies will offer "0%" promotional or introductory rates for a period of six months or 12 months to entice customers to pay off other cards by transferring balances. These terms don't require you to pay any interest for the entire period or term. Once the term expires, the APR will convert to a standard rate based on what the credit card is offering. The new rate will be higher and your balance will be subject to finance charges.
Terms
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If any of your payments are late, the offer may be canceled and your entire balance will be subject to a default rate which could be as high as 25 percent or more, but it depends on the credit-card company. Most companies will not reinstate your 0% APR if you are late. The only way to get similar terms again is to accept another balance transfer offer from another credit-card company.
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Balance Categories
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Your credit card balance can be divided into two or three categories. You can have purchases on your credit card which are subject to higher APR, such as 12 percent, while the other portion of the balance can have a 0% APR. When you make your payments they will go toward paying off the 0% APR balance before the purchase balance with the APR of 12 percent. This allows your purchase balance to accumulate interest. If your balance with a 0% APR is substantial it could be quite a while before you are able to payoff the balance which is accumulating interest.
Fees
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A lot of people will do balance transfer after balance transfer as soon as another 0% APR becomes available. When ever you do a balance transfer there is usually a fee of 3 percent of the amount transferred. Some credit-card companies will place a maximum of $75 on the fee and others will have no maximum amount.
Transfers/Purchases
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Some credit-card companies will offer a 0% APR for balance-transfers only and others will offer it for purchases only, and then others will offer this APR for both balance transfers and purchases. The latter is going to be your best option because you are not paying interest on either category. Usually the 0% APR will expire before the balance-transfer amount is paid off, leading to finance charges on the transferred balance.
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