There are several good reasons to apply for a new credit card: To earn better rewards on everyday spending, to put a few extra dollars in your pocket with a cash sign-up bonus or to take advantage of a 0 percent introductory APR.
Although its usually best to avoid carrying a credit card balance at all, there are two situations in which you might want to use a card with a 0 percent intro APR:
- You’re already trying to pay down a credit card balance. In this case, a balance transfer offers a way to consolidate your credit card debt and pay it off in a timely manner—at a reduced interest rate.
- You’re going to make a large purchase and would rather pay the purchase off over time—interest-free—rather than cashing out your savings all at once.
In most cases, these are two very different scenarios, and would you select either the best balance transfer credit card or credit card with a 0 percent intro APR on purchases for the occasion.
Sometimes, however, you might be able to utilize a 0 percent intro APR on both purchases and balance transfers. If you’re savvy, it is possible to safely put new purchases at 0 percent APR onto a balance transfer credit card. But you should only do this if the card offers a 0 percent intro APR on purchases as well as balance transfers. If your card does not offer a 0 percent purchase APR, it’s best to avoid making purchases all together. You’ll be stuck paying off more debt at a high interest rate.
What’s the difference between a balance transfer APR and a purchase APR?
A balance transfer card allows you to transfer a balance from one card with a high interest rate to a new card with a lower interest rate, often 0 percent, for a set period of time. The card may also charge an initial balance transfer fee to complete the transfer. These cards will often have a specific balance transfer APR that applies only to transferred balances from another account.
Conversely, a credit card’s purchase APR is different from the balance transfer APR because it applies only to new purchases you make.
As an example, let’s take a look at two versions of the same credit card that Discover offers.
Discover offers two versions of its popular Discover it® Credit Card. Both feature the same excellent cashback program and other benefits. The only difference between the two cards is the duration of the intro APR on purchases and balance transfers.
- Please note the offers for Discover have expired or are no longer available.
When to take a 0 percent intro APR on both purchases and transfers
If you know you’ll be able to pay off your balance transfer and the purchases you make during the intro period, this offer is best for you.
For example, say you recently bought a house and you used a credit card with a 0 percent intro APR to buy a washer and dryer, but that 0 percent APR is expiring and you realize you want more time to pay it off.
But you’re also beginning to renovate a bathroom at a cost of several thousand dollars. You have that money in an interest-bearing savings account, so you see an opportunity to purchase the supplies you’ll need for your bathroom project, interest-free, without the need to tap your savings account.
Assuming you can pay off the balance you’re transferring and the bathroom expenses in the intro period, applying for the Discover card that gives you an intro APR on both purchases and balance transfers allows you to pay no interest on all of your new home expenses.
When to take a longer 0 percent balance transfer intro APR
If you need longer to pay off an older card balance, opt for the 18 month offer, even if you think you’ll be able to pay it off sooner—it’s better to be safe than sorry. That way you have the six months 0 percent purchase APR as a backup in case you need to make a purchase you know you’ll be able to pay off within that time.
After the six months, any payments above the minimum will apply to the new purchases balance which will be incurring interest at the standard rate. This means that your payments will apply to your balance transfer only after new purchases have been paid off—so you can see why it would be dangerous to rack up a new debt.
Taking the previous example, let’s say you just redid your bathroom, but now you realize you need a new fridge. If you can’t afford to pay for the whole thing upfront, but you’re sure you’ll be able to in 6 months—this card still gives you that time to pay off a new purchase. That way you can pay off your bathroom remodel over 18 months and your new fridge in six, without spending a dime on interest.
It could be best to just use the 18-month balance transfer
Just because Discover offers intro purchase APRs on both purchases and balance transfers doesn’t mean you have to use them. A balance transfer card exists for you to pay off previous balances—so if you don’t have to add to it, don’t.
As a friendly reminder, using a 0 percent intro APR on purchases to take a trip or make a big purchase “just because you can” often leads to problems down the road. Don’t make a purchase you can’t afford to pay off—even at 0 percent!
Intro APRs may NOT apply to all transactions!
When you get a new credit card offering a 0 percent intro APR, pay attention to the kind of transactions that qualify for the 0 percent APR.
In the case of balance transfers, for example, many cards will only honor the 0 percent APR for balance transfers made within so many days of opening the account.
With some cards, if you incur a penalty fee by paying late or going over your credit limit, the 0 percent intro APR may not apply to that fee. Luckily, the Discover it® cards are forgiving—you won’t be charged a fee on your first late payment or a penalty APR.
Finally, remember that any kind of cash advance made on a credit card is treated differently than a purchase. Whether you go to an ATM and withdraw cash with a PIN, get a cash advance at a bank teller, or use a cash access check from the credit card company, these transactions may all be treated as cash advances and be subject to cash advance fees and the cash advance APR, which is typically higher than the regular APR for purchases. Our advice? Don’t use a credit card cash advance unless your life literally depends on it.
Choosing a new credit card will always involve some kind of compromise—no single card offers the longest 0 percent intro APR, the richest signup bonus, or the best ongoing rewards.
When it comes to introductory APRs, some cards offer intro APRs on both purchases and balance transfers, but for shorter periods than a card that offers the intro APR on just balance transfers. Choose carefully. While there are some situations in which you might want to take advantage of a 0 percent intro APR on both purchases and balance transfers, we suspect that most of the time, one or the other will suffice.
Whichever is the case for you, check out both versions of the Discover it® card carefully—the Discover it® Cash Back or the Discover it® Balance Transfer Card.
Both cards will give you a dollar-for-dollar match of all the cash back you’ve earned at the end of your first year, automatically, and reward you with 5 percent cash back in rotating categories each quarter like gas stations, Amazon.com, restaurants, wholesale clubs and more, up to the quarterly maximum each time you activate, plus, unlimited 1 percent cash back on all other purchases.
If you can pay everything off in a set amount of time, you can avoid paying interest altogether and get the benefit of a great cash back card after everything is paid off.