What is the real advantage of using credit cards with a 0% APR?

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worthit
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What is the real advantage of using credit cards with a 0% APR?

Post by worthit »

BHs:

I am trying to decide accepting an offer for a 0% APR. One for 15 months and another for 21 months. What is real advantage of using these? Would investing the money in the market that I would use to pay the CC in full make sense assuming I pay them off before the APR kicks in? Can someone explain the pros and cons of such a card at a 5th grade level please?

Thanks in advance.
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retired@50
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Re: What is the real advantage of using credit cards with a 0% APR?

Post by retired@50 »

worthit wrote: Sun Feb 02, 2025 6:08 pm BHs:

I am trying to decide accepting an offer for a 0% APR. One for 15 months and another for 21 months. What is real advantage of using these? Would investing the money in the market that I would use to pay the CC in full make sense assuming I pay them off before the APR kicks in? Can someone explain the pros and cons of such a card at a 5th grade level please?

Thanks in advance.
I think these are generally used for people who already have outstanding credit card balances. As I understand it, one can transfer their balance from one card where interest is being paid, to the 0% APR card. This gives the indebted person time to catch their breath and maybe catch up on payments.

If you don't have any outstanding credit card debt then I wouldn't encourage you to get some just to take advantage of this offer. This sounds like a tobacco company giving away a pack of cigarettes, hoping to turn some people into smokers. Don't take the bait.

If you're thinking that you can take a 0% cash advance, then I'd say you'd better read the fine print. I don't think the 0% applies to cash advances on a credit card.

Regards,
"All of us would be better investors if we just made fewer decisions." - Daniel Kahneman
exodusNH
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Re: What is the real advantage of using credit cards with a 0% APR?

Post by exodusNH »

worthit wrote: Sun Feb 02, 2025 6:08 pm BHs:

I am trying to decide accepting an offer for a 0% APR. One for 15 months and another for 21 months. What is real advantage of using these? Would investing the money in the market that I would use to pay the CC in full make sense assuming I pay them off before the APR kicks in? Can someone explain the pros and cons of such a card at a 5th grade level please?

Thanks in advance.
Yes, you let the balance accumulate, paying just the minimum. Then, before the 0% expires, you pay it all off.

To avoid getting in trouble, I set aside the full payment into a Treasury maturing before the rate expires. That way I don't have to scramble to come up with $20,000 in cash to pay the card off.

The ever-increasing balance does eventually ding your credit (20-40 points). If you expect to need to apply for a loan before you clear the balance, it might not be a good idea.

If the card doesn't have cash back, then your maximum benefit is just a couple percent.
lereh
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Re: What is the real advantage of using credit cards with a 0% APR?

Post by lereh »

Beware. Balance transfers and “convenience checks” often come with a 4% upfront fee.

New purchases are probably ok, so long as you pay it off at 18 months (or whenever). They are counting on you to forget.

Not worth the trouble. IMHO YMMV
Mike Scott
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Re: What is the real advantage of using credit cards with a 0% APR?

Post by Mike Scott »

The ideal case is to immediately max the limit on the card, collect any spend bonus and put enough "cash" in a safe place with interest until the final payout date. You do have to make the minimum payments along the way. You may decide that the bonus plus the interest is worth doing it or you may not. Because of high credit use dinging your personal score, most business cards are an even better choice for this.

The other best case is floating an emergency expense for convenience.

Worst case is snowballing credit card debt from card to card.

The interest down the road is the bait and the hook.
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Re: What is the real advantage of using credit cards with a 0% APR?

Post by 123 »

retired@50 wrote: Sun Feb 02, 2025 6:21 pm ...I think these are generally used for people who already have outstanding credit card balances. As I understand it, one can transfer their balance from one card where interest is being paid, to the 0% APR card. This gives the indebted person time to catch their breath and maybe catch up on payments...
+1 I agree they are pretty much a trap to ensnare card holders that carry balances. Card issuers likely know that card holders that carry balances rarely reform and, without pressure to make payments for some period of time, will spend more to maximize the "free ride". Just a way to lock in new high revenue customers.
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vaylie
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Re: What is the real advantage of using credit cards with a 0% APR?

Post by vaylie »

I think they're worth it if you have plans to make a big purchase and you're good at keeping track of your money. I'm actually thinking of getting one of these cards to get some free interest on my upcoming tax payment (probably around 21k).
rufflesinc
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Re: What is the real advantage of using credit cards with a 0% APR?

Post by rufflesinc »

Note the difference between 0% purchase APR (eligible for purchase points and bonus if card has) and 0% BT APR (has additional 2-3% fee, not eligible for points). It seems that around 2022 when interest rates went up, these offers came hard and fast, I never had them before

I use them to pay property taxes, insurance, estimated quarterly taxes, large projects on my rentals, whatever big expenses I would have, and let the money in my bank account earn interest. It's like a short term line of credit.

I keep a stack of these offers ( they also send them to my LLC) and apply for them as needed or as they expire.
Last edited by rufflesinc on Sun Feb 02, 2025 7:17 pm, edited 1 time in total.
artpennypacker
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Re: What is the real advantage of using credit cards with a 0% APR?

Post by artpennypacker »

Wasn’t it Ben Carson from Animal spirits that did the “buy tBills with 0% credit?”

Haven’t listened to them in awhile so I’m not sure how it ended up.
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Tycoon
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Re: What is the real advantage of using credit cards with a 0% APR?

Post by Tycoon »

Free 0% loans with cash bonuses. Why wouldn't I have done it multiple times. :moneybag :moneybag :moneybag :moneybag
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mkbkxepq
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Re: What is the real advantage of using credit cards with a 0% APR?

Post by mkbkxepq »

Big purchase of $10,000, it all goes on the card.

Sign up Bonus: $200
1% cash back on purchases: $100
$10,000 in SGOV for a year: ~$450

Not a lot of work for $750
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worthit
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Re: What is the real advantage of using credit cards with a 0% APR?

Post by worthit »

Thank you, all. Appreciate all the responses.

So in essence, it may only be worthwhile if one pays off the card in full before the APR kicks in. Also, they hopefully don't have to apply for a loan in the near future as this may impact their credit score. Just to clarify, I don't have the need to apply for a loan and also these cards don't have a balance transfer fees.
mkbkxepq
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Re: What is the real advantage of using credit cards with a 0% APR?

Post by mkbkxepq »

worthit wrote: Sun Feb 02, 2025 7:21 pm Thank you, all. Appreciate all the responses.

So in essence, it may only be worthwhile if one pays off the card in full before the APR kicks in. Also, they hopefully don't have to apply for a loan in the near future as this may impact their credit score. Just to clarify, I don't have the need to apply for a loan and also these cards don't have a balance transfer fees.
If your credit is good, it won't matter. Mine without a balance is 820, with a balance is 790-800. I can get a loan with either number.
Ron Ronnerson
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Re: What is the real advantage of using credit cards with a 0% APR?

Post by Ron Ronnerson »

Carrying 0% credit card debt isn't a good idea for everyone but might be worth it for some. These types of decisions are best made with a calculator in hand so that you can get good idea about how much you might earn from it.

In 2022 and 2023, my wife and I started opening up new credit cards offering 0% rates for periods such as 18 months. By the time 2024 rolled around, we were up to about $60k in credit card debt, spread out over a bunch of credit cards. We had the cash to pay off the balance at any time but it was being utilized in other ways. For example, we purchased I-bonds paying between 6-10% during that time and churned a couple dozen bank accounts for bonuses.

Our credit scores fell slightly but we were not looking for any other loans so it didn’t matter that much to us. For someone who might need a loan for something like a house purchase, it may not be worthwhile to carry credit card debt.

We paid off all the cards before the 0% promo rates expired and currently just have a measly $3k that we’re carrying at 0%.

Anyway, the purchases you put on the cards end up being paid back at a future date with dollars that have less purchasing power due to inflation. However, to really take advantage, you have to sort of load up on the debt while deploying your cash in a way where it is earning a relatively good rate in a safe investment.

If you end up forgetting to pay off the card prior to the promo ending, it will likely be bad as credit cards usually charge a very high rate – meaning that 15- or 18-months’ worth of profit could be wiped out rather quickly. Also, if a great opportunity suddenly appears (like a pandemic occurs and you get the chance to refinance your house at a ridiculously low rate), carrying a lot of credit card debt could potentially pose an issue.

As for a more remote possibility, there is always the chance of loan forgiveness. Our government has shown that it sometimes offers this to people but only to those who still owe money. Additionally, one could die while carrying debt and then it becomes someone else’s problem. Whether a person considers that a pro or a con, well, the answer to that might vary.
rufflesinc
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Re: What is the real advantage of using credit cards with a 0% APR?

Post by rufflesinc »

Ron Ronnerson wrote: Sun Feb 02, 2025 7:50 pm Additionally, one could die while carrying debt and then it becomes someone else’s problem. Whether a person considers that a pro or a con, well, the answer to that might vary.
The debt will be settled with the assets of your estate. It will reduce how much your heirs inherit, but if you end up owing more than your estate is worth, that debt won't pass to your heirs
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Re: What is the real advantage of using credit cards with a 0% APR?

Post by InvisibleAerobar »

worthit wrote: Sun Feb 02, 2025 7:21 pm Thank you, all. Appreciate all the responses.

So in essence, it may only be worthwhile if one pays off the card in full before the APR kicks in. Also, they hopefully don't have to apply for a loan in the near future as this may impact their credit score. Just to clarify, I don't have the need to apply for a loan and also these cards don't have a balance transfer fees.
At least for me, it had minimal effect when I did a refi.

I applied for my mortgage at avg credit of ~810, and I haven't carried a credit card balance in 10+ years (even then, it was on a card with 0% promo period). We wanted to install hardwood flooring, which cost ~$30k. We put ~$16k of that on a card with 0% intro rate, and my credit dropped down to 765-780, as utilization went up to ~17%.

Even with this hit to my credit, I still qualified for the lowest available mortgage rates when I did a refi, as the most favored tier requires only a credit score of 760. I sorta knew this already, but was still surprised to see that anything 760 and above being treated as the same. I think this is especially the case for a 15-yr mortgage. Were the requirement 780 or higher, I'd have paid off some amount (I think $3k does it in my case) and then fill that up again afterwards.
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Re: What is the real advantage of using credit cards with a 0% APR?

Post by Ron Ronnerson »

rufflesinc wrote: Sun Feb 02, 2025 7:52 pm
Ron Ronnerson wrote: Sun Feb 02, 2025 7:50 pm Additionally, one could die while carrying debt and then it becomes someone else’s problem. Whether a person considers that a pro or a con, well, the answer to that might vary.
The debt will be settled with the assets of your estate. It will reduce how much your heirs inherit, but if you end up owing more than your estate is worth, that debt won't pass to your heirs
Yep. Perhaps one doesn't care how much the heirs get to collect. Or perhaps one cares very much. That's why the answer might vary as to whether it's a pro or con.
Miguelito
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Re: What is the real advantage of using credit cards with a 0% APR?

Post by Miguelito »

I used these types of credit cards when I was young. I had a pretty high credit and it enabled me to pay off school loans that were at 6-7% many months earlier, saving the interest. I always paid off the balance before the offer expired. Of course, they hope people won't and then you are stuck with a higher interest rate, and if I recall correctly, in some cases they could claw back the interest from the 0% months.
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Re: What is the real advantage of using credit cards with a 0% APR?

Post by Thesaints »

worthit wrote: Sun Feb 02, 2025 6:08 pm BHs:

I am trying to decide accepting an offer for a 0% APR. One for 15 months and another for 21 months. What is real advantage of using these? Would investing the money in the market that I would use to pay the CC in full make sense assuming I pay them off before the APR kicks in? Can someone explain the pros and cons of such a card at a 5th grade level please?

Thanks in advance.
A free loan ?
You only have to make minimum payments while the APR stays at 0%
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climber2020
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Re: What is the real advantage of using credit cards with a 0% APR?

Post by climber2020 »

worthit wrote: Sun Feb 02, 2025 6:08 pm I am trying to decide accepting an offer for a 0% APR. One for 15 months and another for 21 months. What is real advantage of using these?
The only time in my life I ever had a credit card balance was during the 3 months of voluntary unemployment between the end of my training and start of my first real job. I used a 0% credit card to fund a month long overseas vacation and to buy furniture for my new apartment. Once I started getting a paycheck, I paid off the credit card within a couple of months.
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Re: What is the real advantage of using credit cards with a 0% APR?

Post by sailaway »

A free balance transfer is very rare, but I look for 0% APR whenever we have a big purchase or a project with lots of purchases.

As others have said: be aware of cash flow. I used one a couple of years ago expecting incoming cash before the end of the period. I used my existing cash to buy I bonds, instead of holding it something liquid. Then the expected cash flow was delayed by several months. Boy was that a scramble!
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Re: What is the real advantage of using credit cards with a 0% APR?

Post by hoofaman »

Sometimes my existing cards will give me an offer to rack up and carry a balance with no interest (0% APR) for 6-12 months for purchase, but those offers seem to come and go. I did take advantage of those but it's been a few years since BoFA gave me another opportunity, no complaints with those as there was no cost to me

However I would be skeptical of cards you don't have promoting a 0% APR rate on transfers because the transfer itself typically has a fee of a few percent, to me that's not worth considering
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Re: What is the real advantage of using credit cards with a 0% APR?

Post by Carguy85 »

worthit wrote: Sun Feb 02, 2025 6:08 pm Would investing the money in the market that I would use to pay the CC in full make sense assuming I pay them off before the APR kicks in?
Thanks in advance.

🤔 there is a saying I heard from an old timer that comes to mind…”don’t outsmart your common sense”….I mean, what could possibly go wrong?? Back when I was broke, young, and financially illiterate, I used a 0% credit card offer to buy a Harley and in true fashion thought I was financially savvy for doing so. 😂
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Re: What is the real advantage of using credit cards with a 0% APR?

Post by HooCares »

If I am buying something big, I like to sign up for a new credit card that has 15 months or so of 0% APR plus a signup bonus. I recently made a $5000 purchase and opened a Bank of America Customized cash. 15 months to pay plus a $200 bonus. Yes, I could have opened another card with a bigger bonus minus the APR but I prefer to pay monthly for this instead of outlay the $5k all at once. In fact, I’ve made it my goal to open enough checking/savings account bonuses to make the monthly payment over the 15 months.
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Re: What is the real advantage of using credit cards with a 0% APR?

Post by exodusNH »

worthit wrote: Sun Feb 02, 2025 7:21 pm Thank you, all. Appreciate all the responses.

So in essence, it may only be worthwhile if one pays off the card in full before the APR kicks in. Also, they hopefully don't have to apply for a loan in the near future as this may impact their credit score. Just to clarify, I don't have the need to apply for a loan and also these cards don't have a balance transfer fees.
I would double check the balance transfer fee. In all the 0% offers I've gotten in the last four years, not one of them had 0% transfer fees. The balance would be at 0%, but they would have charged 3-5% of the balance transferred.
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Re: What is the real advantage of using credit cards with a 0% APR?

Post by sailaway »

Carguy85 wrote: Mon Feb 03, 2025 8:06 am
worthit wrote: Sun Feb 02, 2025 6:08 pm Would investing the money in the market that I would use to pay the CC in full make sense assuming I pay them off before the APR kicks in?
Thanks in advance.

🤔 there is a saying I heard from an old timer that comes to mind…”don’t outsmart your common sense”….I mean, what could possibly go wrong?? Back when I was broke, young, and financially illiterate, I used a 0% credit card offer to buy a Harley and in true fashion thought I was financially savvy for doing so. 😂
We did use a 3% transfer fee 0% APR offer to get our first boat. I don't remember we didn't just pay cash, but this was the best of all the financing available.
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pointyhairedboss
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Re: What is the real advantage of using credit cards with a 0% APR?

Post by pointyhairedboss »

I received a 0% APR offer for 9 months on an existing card. At the time, the card that wasn't my primary card. I presume the card issuer's algorithm noticed I had a higher credit utilization on another card and wanted to win back my business.

I accepted the offer and made the card my primary one. I quickly maxed it out, partly because the credit limit was low. I applied for a credit limit increase but was rejected. I doubt the rejection was due to my credit score or utilization. The algorithm likely detected that I was only making minimum payments.

If their strategy was to get me to use the card as my primary one, they failed when they rejected my credit increase request. Since my card is maxed out, there’s no point in carrying it in my wallet. It's now back in the file cabinet, where it will remain as a backup card.

If I receive another 0% APR offer, I will first apply for a credit limit increase (if my credit limit is low) before spending a dime on the card.
Legoman666
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Re: What is the real advantage of using credit cards with a 0% APR?

Post by Legoman666 »

I used a 0% APR card to pay property taxes of about $10k. I have the money set aside, it’s sitting in BOXX earning around 4.5% right now. By keeping it invested, not only will I keep earning 4.5%, I will get LTCG tax treatment on the gains. Additionally, the card had a sign up bonus that more than paid for the 2.9% fee for paying with a credit card.

Seemed like a no brainer.
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