Should you carry a balance on zero APR cards?

When you acquire a credit card with an introductory 0% annual percentage rate, you may think that carrying a balance has no drawbacks. After all, you won't be charged interest during the promotional period. What could possibly go wrong?

However, it's important to note that even if your balance doesn't require you to pay interest each month during the introductory period, failing to make timely payments can still result in negative repercussions, such as the termination of your promotional offer.

It is essential to carefully evaluate your options before maintaining a balance on your card. The decision to carry a balance or not during a promotional period depends on your individual circumstances, which must be considered thoroughly.

Why carry a balance during your introductory APR period?

Carrying a balance on a credit card is generally discouraged. However, there are specific situations where it can be a suitable choice. For example, if you already have a substantial balance on a credit card with a high interest rate and are struggling to pay it off, transferring the balance to a card with a 0% introductory APR can be advantageous. By keeping the balance on the 0% APR card, you can make monthly payments without incurring additional interest charges. This approach helps save money on interest payments over time.

However, it's crucial to have a plan in place to pay off most, if not all, of the balance before the introductory APR period ends. Once the period concludes, you will be subject to the regular APR on the remaining balance.

Carrying a balance should be limited to emergencies or necessary expenses that cannot be postponed. For nonessential purchases, it is advisable to save up funds rather than rely on a credit card — even one with a zero-interest offer.

Related: Do balance transfers affect your credit score?

Potential downsides of carrying a balance

Now that we have discussed reasons why you might carry a balance, you should also consider the potential downsides.

Having a 0% introductory APR does not mean you can simply leave a balance on your card until the promotional period ends. You are still obligated to make at least the minimum payments on time.

Daily Newsletter

Reward your inbox with the TPG Daily newsletter

Join over 700,000 readers for breaking news, in-depth guides and exclusive deals from TPG’s experts

Email address

Sign up

By signing up, you will receive newsletters and promotional content and agree to our Terms of Use and acknowledge the data practices in our Privacy Policy. You may unsubscribe at any time.

Some credit cards may end your promotional period and impose a penalty APR if you fail to make the minimum payment within a certain time frame. If your card has an introductory APR period specifically for purchases or balance transfers, it is best to use it solely for that purpose until your intended balance (whether it is a transferred balance from a high-interest credit card or the cost of a new appliance) is completely paid off.

Carrying a balance during the 0% APR period could also result in the loss of your "grace period." This period is the time between the end of your billing cycle and your payment due date when you are not charged interest on new purchases, provided you have not carried a balance from month to month.

For cards that offer a 0% introductory APR, specifically on balance transfers, carrying a balance will cause you to forfeit the grace period for purchases. To avoid paying interest on your purchases, you should pay off your statement balance, including the transferred amount, by the due date.

How carrying a balance affects your credit

The belief that carrying a balance is beneficial for building credit is a common myth. In reality, credit card companies report the balance reflected on your statement to the credit bureaus, regardless of whether you pay the full amount or carry it over to the following month. This reported balance remains the same for that specific month.

Leaving a balance on your card increases your credit utilization ratio, which compares the amount you owe on revolving accounts (such as credit cards) to your credit limit. Generally, you should use no more than 30% of your total credit limit, as a higher utilization ratio can negatively impact your credit score.

Moreover, carrying any balance that is not covered by a promotional 0% APR will result in interest charges, causing you to pay more for your purchases in the long run. Accumulating interest can make it more challenging to keep up with your payments and may increase the likelihood of missing your minimum payment deadline. Missing a payment or paying late can negatively affect your credit score.

How to pay off your balance during your introductory APR period

To make paying off your entire credit card balance each month easier, create a budget before using your card. Try to charge purchases to your card only when you have enough allocated funds in your budget to pay them off completely.

Your credit card company is required to provide you with a statement at least 21 days before your due date. Upon receiving your statement, it is crucial to review it promptly. Note the payment due date and decide how you will make your payment. Options may include paying through the credit card issuer's mobile app or website, by phone or by mailing a check.

Missing the due date could result in late fees or a penalty APR. To avoid late payments, consider setting reminder emails or notifications on your phone to alert you as the due date approaches.

Signing up for autopay can make paying your balance nearly effortless. With autopay, funds are automatically transferred from your bank account to your credit card issuer each month. However, it is still important to monitor your credit card balance to ensure you have sufficient funds in your bank account to cover it.

Related: How to lower your credit card interest rate

What to do if you've overspent

It's never ideal to be left with a larger balance than you can manage when the 0% introductory APR period ends. To address this situation, it is crucial to pay down your balance as much as possible before the regular APR comes into effect. By doing so, you can minimize the amount of interest you will be charged. If feasible, consider pausing payments in other areas or finding ways to generate extra income to bring your balance closer to zero.

Another option is to transfer your balance to another credit card that offers a 0% introductory APR period. Approach this option with caution, though. You don't want to find yourself in a similar or worse situation a few months down the line. If you decide to go this route, ensure that you have a well-defined plan to eliminate your debt within the new card's 0% APR period.

Related: Are you paying enough attention to your credit card's APR?

What happens after your introductory APR period ends?

If you decide to maintain a balance during a 0% APR period, you must keep track of when the promotional period concludes. Once the introductory period ends, your credit card company will start applying interest charges to the balances that were previously covered by the 0% promotional rate.

From that point onward, any new charges on the card will be subject to the current APR mentioned on your statement.

Bottom line

There may be valid reasons to carry a balance during a 0% APR period, such as paying off a balance from another card or making a significant purchase. However, it is important to be cautious. Failing to read the fine print and closely monitor your card usage can result in unexpected interest charges or fees.

Continuously carrying a balance from one month to another can raise your credit utilization ratio, which can have a detrimental effect on your credit score. Therefore, it's advisable to pay off your balance as soon as possible — doing so will always be beneficial.

Related: Best 0% APR and low-interest credit cards