How to use a 0% APR credit card as an interest-free loan

Preparing for a major purchase? You could pursue short-term financing in the form of a personal loan, home equity loan or home equity line of credit. But if you can afford to pay off what you borrow in full within a year or so, a 0 percent APR credit card could be a better option. This type of card can save a lot of money you would otherwise spend on interest charges.

Learn more about how this type of credit card works — and how you might be able to use one as an interest-free loan on large purchases.

How a 0% intro credit card works

While the terms 0 percent intro APR card and balance transfer card are often used interchangeably, they’re technically different. A balance transfer card has a 0 percent intro APR period on balance transfers specifically, allowing you to transfer high-interest debt from another card and avoid interest while you pay off the transferred balance on the balance transfer card.

A 0 percent intro APR card refers more generally to a card with any type of 0 percent introductory APR offer that may apply to balance transfers, new purchases or both, depending on the terms of the card. If a card’s 0 percent introductory APR only applies to new purchases, it’s not suitable as a balance transfer card.

The introductory 0 percent APR period you’re offered with this type of card typically ranges from six to 21 months, depending on the card. After your intro period expires, the interest rate increases to the standard (typically variable) rate for your remaining balance due and any future purchases.

“The interest rate from there will depend on your credit,” says Laura Sterling, VP of marketing at Georgia’s Own Credit Union. “In many instances, cards that offer 0 percent interest during the introductory period charge a higher standard rate than those without introductory offers, although that is not always the case.”

Because balance transfer cards and 0 percent intro APR cards come with different features, you’ll want to compare these benefits against your needs before signing up. Also note any fees — such as annual fees and balance transfer fees — that can influence the overall cost of using the card.

How to use a 0% APR card as an interest-free loan

It’s possible to use a 0 percent intro APR card as an interest-free loan on high-dollar purchases. Simply look for a card that offers 0 percent interest on purchases, then prioritize paying off your purchases before the promotional period ends. If a card only offers a 0 percent introductory APR on balance transfers but not new purchases, it’s still possible — but not ideal — to use it to finance an upcoming purchase. You’d need to charge your purchase to another card, then transfer the balance to the 0 percent intro APR card within the required timeframe, possibly incurring balance transfer fees in the process.

Let’s say you’re in the market for a new refrigerator. If you used a new 0 percent interest card for that purchase, you’d be able to pay down the purchase with no additional interest for up to 21 months, depending on your card. To reach that goal, you’d need to divide the purchase price by the number of months in your promotional period.

Here’s an example of what you might need to pay when treating a 0 percent intro APR card as an interest-free loan, depending on a range of typical promotional periods.

The above example assumes that you don’t make additional charges on the card beyond the initial purchase.

You typically need good credit to qualify for a 0 percent credit card.

“A good candidate is someone with a strong credit score — typically 670 or higher — a reliable income and the discipline to pay off the balance before the 0 percent APR period ends,” says Andrew Latham, a certified financial planner and director of content at SuperMoney.

Even if you have a 0 percent intro APR offer, you’ll need to pay at least the minimum payment on your card on time each month. Otherwise, your credit score could take a hit, you could face late fees and your issuer may revoke your 0 percent APR offer (depending on the terms of your card). The monthly payment you should actually make in order to pay off your full balance within the intro APR period will likely be higher than the minimum monthly payment required by your issuer.

Pros and cons of a 0% credit card

A 0 percent APR credit card offers numerous perks and also potential drawbacks when used as an interest-free loan.

“For one, it allows you to make significant purchases or balance transfers without accruing any interest during the promotional period,” says Latham. “This can effectively provide an interest-free loan for a major purchase or a period of respite to pay down existing high-interest debt.”

Switching from a card with a higher interest rate to a 0 percent intro APR card can save you on interest while also reducing your required minimum payment.

And because every dollar goes toward reducing your principal balance, consolidating debt with a balance transfer credit card at zero interest can help you pay off your debt more quickly than with a traditional card.

But, it’s not free money.

“It’s easy to forget that the 0 percent APR period will end. You can hit that deadline and be surprised that your balance is suddenly higher than it was beforehand,” cautions Joe Camberato of National Business Capital. “Some 0 percent APR credit cards also charge higher interest rates after the intro period ends compared to standard credit cards, too.”

When to pay for a purchase with a 0% credit card

If you need to borrow money for a major purchase that you plan to repay within a few months, you’re likely a good prospect for a 0 percent credit card.

Here are three examples where applying for and using a 0 percent APR credit card versus a short-term loan can be worthwhile.

1. An urgent home improvement. Let’s say you need to replace an old washer and dryer. You apply for a 0 percent APR credit card with an interest-free intro APR of 18 months on new purchases, and you put $3,600 on your $5,000-limit card to pay for the new appliances and installation. If you pay at least $200 each month on your card for 18 months, you’ll pay off your new washer and dryer without paying any interest.
2. A new home office. Imagine you want to convert an empty bedroom into a work-from-home space on the cheap, but you need to repaint and purchase a new desk and new computer that costs $3,000 total. If you were to charge the $3,000 on a 0 percent APR credit card with a 12-month promotional APR period for new purchases, you could pay $250 monthly for 12 months and fully pay off the purchases.
3. A business startup. Let’s say you’re an entrepreneur planning to launch a landscape contracting company, and you need to invest $6,000 into the purchase of two riding mowers. If you qualified for a 0 percent APR credit card offering no interest on new purchases for 18 months, you’d pay only $334 a month to pay it off without interest. “This can enable you to purchase the equipment you need and use your profits to pay off the balance instead of leveraging your personal funds,” Camberato says.

How to choose the right 0% APR offer

Before applying for a 0 percent intro APR credit card, consider the following key features:

• Length of the intro offer. The most critical factor when choosing a 0 percent APR credit card is the duration of its introductory period. While cards often offer zero interest for at least 15 months, some cards offer up to 21 months without interest. This period determines how long you can avoid paying interest before the regular APR kicks in.
• Qualified transfers or purchases. Some 0 percent intro APR credit cards offer no interest on purchases only, balance transfers only or both. And the intro periods can differ between purchases and balance transfers. For instance, you might enjoy a 0 percent intro APR on purchases for 12 months and a 0 percent intro APR on balance transfers for 18 months. If your card only offers a promotional rate on balance transfers, it’s not a good candidate for financing new purchases.
• Lower rates and fees. Look for a card that offers a low everyday interest after your promotional period ends. Low or no annual fee is also ideal.
• Perks and rewards. Think about the long-term value of the card you’re interested in. Do rewards align with your spending habits? If you spend a lot at the supermarket, a top grocery store rewards card offering a 0 percent APR period can earn you rewards into the future.

0% intro APR cards you can use as a short-term loan

Here are four 0 percent APR credit cards worth considering as alternatives to a short-term loan.

The bottom line

You’ll find plenty of solid 0 percent APR credit cards on the market for use as an interest-free loan. But make sure to read the card terms carefully to know exactly what the intro APR does — and doesn’t — apply to, and ensure you’re able to pay off your balance in full within the promotional period before signing up.

Information about the BankAmericard® credit card has been collected independently by Bankrate. Card details have not been reviewed or approved by the card issuer.

The Bank of America content in this post was last updated on September 23, 2024.