Best Credit Cards - No-Interest (0% APR credit card offers)

How does the idea of borrowing money for free sound? Well, you can--at least for a while--with 0% APR credit cards.

As enticing as they sound, you should understand the nature of these cards before you apply for one. When used wisely, they can be great tools for making a big purchase or paying down your credit card debt. But you should always read the fine print closely, because the 0% part of the offer doesn't last forever.

A look at APR

APR, which stands for annual percentage rate, is the yearly percentage of interest you'll be charged on any revolving credit card balance. So with a 0% APR, you pay no interest on credit extended to you--until the introductory period ends and the standard APR kicks in.

Credit cards may have one APR or several APRs for different types of transaction: purchases, cash advances and balance transfers. The APR for balance transfers and cash advances is frequently higher than the APR for purchases.

As with all credit cards, there are key limitations to 0% APR cards. The most important limitation to note is that the 0% interest rate is only an introductory rate and therefore lasts only for a specific time, such as six, 12, 15 or 21 months (the minimum is six months.)

At the end of that period, the APR will increase to a level often determined by your creditworthiness--your credit score, debt, income and other factors will determine most of this. The lower your credit score, the higher your APR likely will be.

Another important limitation is that 0% rate may only apply to certain transactions such as purchases, balance transfers or possibly both. So you need to know which transactions the special rate applies to before you begin spending.

The APR after the introductory period may be a fixed rate or a variable rate. A fixed rate remains the same during the period of time outlined in your credit card agreement. A variable rate, however, can change without notice. An unexpected increase means you'll pay more interest on your balance. Sometimes a fixed-rate APR becomes a variable-rate after the introductory period ends.

Benefits of zero percent cards

You can capitalize on a 0% APR offer in three ways. You can:

• Make a large purchase: If you know you'll be making a large purchase and need more than one month to pay it off, with a 0% APR, you'll save the interest you would've paid on a card with a higher interest rate (provided you pay it off before the introductory period ends).
• Transfer a balance: If you have a credit card with a high interest rate and a balance, you could save money by transferring that balance to a 0% APR credit card. Many cards charge fees to transfer a balance, though--often 3 percent of the amount transferred. So include those fees in your calculations when determining whether this move is financially sound.
• Consolidate your debt: If you have several credit cards with balances, you could consolidate those debts onto one card, provided the amounts don't exceed the credit limit on your new card. During the 0% APR offer period, you wouldn't have to pay interest on this consolidated debt. After that, you'd only pay interest on the one card rather than on multiple cards. Again, balance transfer fees could apply.

The key to success with all of these strategies is to pay the entire balance before the 0% APR offer ends. By doing this, you can save considerably in the interest charges you'd pay on a card with a conventional interest rate.