0 APR on Purchases: What Does it Mean?
When you're shopping for a new credit card, you may come across offers that boast "0 APR on purchases" or "0% intro APR on purchases." But what does this mean, and how can it benefit you?
What is APR?
Before we dive into the specifics of 0 APR on purchases, let's quickly define what APR stands for. APR stands for Annual Percentage Rate, which is the interest rate charged on your outstanding credit card balance over a year. It's the cost of borrowing money from your credit card issuer.
What is 0 APR on Purchases?
A 0 APR on purchases offer means that you won't be charged any interest on your purchases for a specific period, usually ranging from 6 to 21 months. This promotional period allows you to borrow money from your credit card issuer without incurring any interest charges.
For example, let's say you apply for a credit card with a 0 APR on purchases for 12 months. During this time, you can make purchases without worrying about accruing interest. If you pay off your balance in full each month, you won't be charged any interest. If you carry a balance, you won't be charged interest for the first 12 months.
How Does 0 APR on Purchases Work?
Here's an example of how 0 APR on purchases works:
- You apply for a credit card with a 0 APR on purchases for 18 months.
- You make a purchase of $1,000 on the credit card.
- You don't pay the full balance off each month, but you make minimum payments.
- Since you have a 0 APR on purchases, you won't be charged any interest for the first 18 months.
- After the 18-month promotional period ends, the regular APR will apply to your outstanding balance.
Benefits of 0 APR on Purchases
A 0 APR on purchases offer can be beneficial in several ways:
- Save money on interest: By avoiding interest charges for a specific period, you can save money on your credit card debt.
- Make large purchases: A 0 APR on purchases offer can be helpful if you need to make a large purchase, such as a new TV or a piece of furniture, and you don't have the cash upfront.
- Pay off debt: If you have existing credit card debt, you can transfer it to a new credit card with a 0 APR on purchases offer, giving you time to pay off the debt without incurring interest charges.
Things to Keep in Mind
While a 0 APR on purchases offer can be beneficial, there are some things to keep in mind:
- Regular APR will apply after the promotional period: Once the promotional period ends, the regular APR will apply to your outstanding balance.
- You may be charged interest if you don't pay off the balance in full: If you don't pay off the balance in full during the promotional period, you may be charged interest on the remaining balance once the regular APR applies.
- Other fees may apply: Even with a 0 APR on purchases offer, you may still be charged other fees, such as late fees or foreign transaction fees.
Conclusion
A 0 APR on purchases offer can be a great way to save money on interest and make large purchases without breaking the bank. However, it's essential to read the fine print, understand the terms and conditions, and make timely payments to avoid interest charges. By doing so, you can make the most of a 0 APR on purchases offer and keep your credit card debt under control.
