A 0% APR credit card offers an introductory period without finance charges on purchases, balance transfers or both. Getting a break from finance charges can be a welcome change from the double-digit interest typically charged on credit cards or other loans. The less you’re paying in interest, the more you can put towards paying off your debt.

How Does 0% APR Work?

Introductory 0% APR offers allow new cardholders to finance purchases or balance transfers—sometimes both, depending upon the offer and card agreement terms—without paying interest for a predetermined period of time. After this time, the regular, ongoing interest rate applies to any remaining balances.

The table below demonstrates the difference in cost for borrowing $1,000 for 12 months on either a card with an 18% ongoing APR or a card with a 0% introductory APR for 12 months. Assuming the cardholder makes equal monthly payments each month, the cost of carrying the balance is evident. You can calculate your own interest rates using our credit card payoff calculator.

Note that 0% introductory APRs are significantly different from deferred interest financing, which may charge interest from the date of purchase. Deferred interest financing is often referred to as “special financing”. Carefully read any card agreement before applying for a card.

What Happens When 0% APR Ends?

When a 0% introductory APR period ends, the ongoing APR applies to any unpaid balances carried on the card. For this reason, it’s critical you pay off any balances before the end of the introductory period.

How Does Credit Score Affect Interest Rates?

When applying for a credit card, your creditworthiness as determined by the card issuer is a central factor in determining the interest rate offered to you. Your credit score is a reference of your creditworthiness as evaluated against a certain set of criteria by a credit bureau.

Elements of your credit, like your payment history, credit utilization and the number and length of accounts you have help determine your credit score. The higher your score, the better your credit and, in general, the more likely you’ll be to receive a credit card approval and a lower interest rate. The better your credit, the less an issuer will be likely to charge you in interest.

Your credit is not the only element an issuer considers, however. Your income and certain expenses may also weigh on a card issuer’s decision to offer you a lower or higher rate.