How to use a 0% APR credit card as an interest-free loan
Editor's Note
If you're getting ready to finance a big purchase, there are a number of options that can help, including personal loans, home equity loans and home equity lines of credit.
But if you have the means to repay the borrowed amount in full within a few months, your best option could be to use a credit card with a 0% annual percentage rate (APR), which can save you a big chunk of money you would otherwise spend on interest.
Keep reading to learn more about how 0% APR cards work and how you could use one to finance your next big buy.
How 0% APR cards work
A 0% APR credit card does not require you to pay interest on your credit card balance for a specified period. This introductory phase typically lasts between six and 21 months, but once it ends, the interest rate will revert to the standard rate, which is often variable, for any remaining balance and future purchases.
Note that these 0% interest cards differ in the benefits and features they offer, with some providing longer introductory periods and various benefits. Annual fees and balance transfer fees can also affect the amount you'll pay when it's all said and done, so you'll want to consider all the above factors when choosing a low-APR card.
0% APR cards: Pros and cons
A 0% APR card can help you save money on interest charges and reduce your monthly credit card payment. Many people also use zero-interest balance transfer credit cards to consolidate debt. They allow you to pay off your debt faster since, with no interest charged, every payment goes directly to the principal balance.
Using any credit card responsibly — including cards with a 0% introductory APR — will help boost your credit score. Paying down debt reduces your credit utilization ratio, which, along with timely payments, is vital for a healthy FICO credit score.
Many 0% APR cards also offer rewards in the form of points or cash back, along with welcome bonuses and limited-time incentives. These cards may also offer perks like cellphone insurance, purchase protection and extended warranties.
These kinds of credit cards do come with some drawbacks, though. Some 0% APR cards may charge a balance transfer fee, typically ranging from 2% to 5% of the transferred amount, when you transfer debt from other issuers.
Additionally, applying for a new credit card can result in a temporary decrease in your credit score due to a hard inquiry, although this impact is generally minor and short-lived.
Lastly, most 0% interest cards don't come with the best rewards, so if you're looking for valuable perks and earnings rates, you'll be better off elsewhere.
Related: 6 things to do to improve your credit score
When should you use a 0% APR card?
Whether you're looking to lower your credit card interest rate or need short-term financing for a major purchase, a 0% APR credit card could be a great choice for you.
In fact, there are a few scenarios where it may be more advantageous than taking out a short-term loan:
- Urgent home improvements: Suppose you need a bathroom renovation or have to replace a washer and a dryer. A 0% APR credit card with an extended introductory APR period would allow you to charge the purchase to the card and pay it off over several months with no interest or fees.
- Setting up a new home office: If you wanted to transform an empty bedroom into a work-from-home space, you could buy what you need — a new desk, a second computer screen, etc. — and work to pay off your new setup over time.
- Startup business expenses: Starting a business is rarely cheap, but several 0% APR credit cards for small businesses have extended introductory periods that can help you get your new venture up and running without falling behind the eight-ball with big purchases.
Related: How to manage debt with a balance transfer credit card
Choosing the right 0% APR offer
For most people, the most important factor when selecting a 0% APR credit card will be the length of the 0% interest period. These typically range from 15 to 21 months but can vary from card to card.
You'll also want to read the offer details. Some 0% introductory APR credit cards cover purchases, balance transfers or both, and different timelines may apply for zero-interest purchases and balance transfers.
For example, you might receive 0% APR on purchases for 12 months and on balance transfers for 18 months.
You should always consider the additional perks and rewards offered by a 0% APR credit card. Some offer cash back, points or other incentives, while others offer travel perks and benefits you can use on your next trip.
Finally, if earning rewards isn't a priority, look for a card with a lower standard interest rate for when the 0% APR period ends, along with no annual or balance transfer fees.
Related: Should you carry a balance on zero APR cards?
Bottom line
It's important to be mindful when choosing (and using) a 0% APR credit card. If you fail to pay off your balance before the introductory period ends, you could end up with unexpected charges, defeating the entire purpose of acquiring a low-interest card.
Be sure to explore the options that best suit your repayment timeline and financial restrictions. For example, if you don't qualify for a 0% APR credit card, a personal loan may be a viable alternative, as they often have more lenient eligibility requirements. Just be careful that you're not paying an excessive APR.
If you think a low-interest card is the right choice, check out our list of the best 0% introductory APR credit cards.
TPG featured card
at American Express's secure site
Terms & restrictions apply. See rates & fees.
| 4X | Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 4X | Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 5X | New! Earn 5X Membership Rewards® points on prepaid hotel stays booked through AmexTravel.com or the Amex Travel App. |
| 3X | Earn 3X Membership Rewards® points on flights booked through AmexTravel.com, the Amex Travel App, or purchased directly from airlines. |
| 2X | Earn 2X Membership Rewards® points on prepaid car rentals booked through AmexTravel.com or the Amex Travel App and cruises booked and paid through AmexTravel.com. |
| 1X | Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases. |
Pros
- Valuable dining and food-related credits
- Flexible rewards with airline and hotel transfer partners
- Multiple travel and purchase protections
- No foreign transaction fees
- Access to Amex Offers for additional savings (enrollment required)
Cons
- Not as useful for those living outside the U.S.
- Some may have trouble using Uber and other dining credits
- You may be eligible for as high as 100,000 Membership Rewards® Points after you spend $8,000 in eligible purchases on your new Card in your first 6 months of Card Membership. Welcome offers vary and you may not be eligible for an offer. Apply to know if you’re approved and find out your exact welcome offer amount – all with no credit score impact. If you’re approved and choose to accept the Card, your score may be impacted.
- Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- New! Earn 5X Membership Rewards® points on prepaid hotel stays booked through AmexTravel.com or the Amex Travel App.
- Earn 3X Membership Rewards® points on flights booked through AmexTravel.com, the Amex Travel App, or purchased directly from airlines.
- Earn 2X Membership Rewards® points on prepaid car rentals booked through AmexTravel.com or the Amex Travel App and cruises booked and paid through AmexTravel.com.
- Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases.
- Pay It® lets you tap in the American Express® App to quickly pay for small purchase amounts throughout the month and still earn rewards the way you usually do. Plan It® gives you the option to split up big purchases into equal monthly payments with a fixed fee. You’ll know upfront exactly how much you’ll pay.
- Updated! $120 Dining Credit: Earn up to a total of $10 in statement credits monthly when you pay with the Gold Card at Grubhub (including Seamless), Buffalo Wild Wings, Five Guys, The Cheesecake Factory, and Wonder. This can be an annual savings of up to $120. Enrollment required.
- $100 Resy Credit: Get up to $100 in statement credits each calendar year at over 10,000 qualifying U.S. Resy restaurants after you pay for eligible purchases with the American Express® Gold Card. That’s up to $50 in statement credits semi-annually. Enrollment required.
- $84 Dunkin' Credit: Earn up to $7 in monthly statement credits after you pay with the American Express® Gold Card at U.S. Dunkin’ locations. Enrollment required.
- $120 Uber Cash on Gold: Enjoy up to $120 in Uber Cash annually with your Gold Card. Just add your Card to your Uber account and you'll get $10 in Uber Cash each month to use on orders and rides in the U.S. when you select an Amex Card for your transaction.
- New! As an American Express® Gold Card Member, you can enjoy complimentary Hertz Five Star® Status. Enjoy benefits like skipping the counter at select locations, adding an additional driver at no additional cost*, and vehicle upgrades**. Benefit enrollment and Hertz Gold+ registration are required. *Additional drivers must meet standard rental qualifications and must be a spouse or domestic partner to qualify as complimentary. Other additional drivers subject to fees. **Benefits are subject to availability and vary by location. Additional Hertz program Terms and Conditions including age restrictions apply.
- Take advantage of a $100 credit towards eligible charges* at over 1,300 upscale hotels worldwide when you book The Hotel Collection through AmexTravel.com or the Amex Travel App **. *Eligible charges vary by property. **The Hotel Collection requires a two-night minimum stay.
- Book your travel through the Amex Travel App with added peace of mind – backed by American Express® service and support. Only for American Express® Card Members.
- Whenever you need us, we're here. Our Member Services team will ensure you are taken care of. From lost Card replacement to statement questions, we are available to help 24/7.
- No Foreign Transaction Fees.
- Annual Fee is $325.
- Terms Apply.