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Is it a good idea to get a credit card with 0% APR for 21 months to pay off balances from other cards?(This question has been edited for clarity and brevity.)
Taking advantage of a good intro APR offer can be an excellent way to help pay off credit card debt. With credit card APRs averaging over 20%, the savings can quickly add up.
However, these cards have nuances you'll want to be aware of. There are different types of intro APRs, fees and limits that are important to understand.
Balance transfer APR vs. purchase APR
There are two main types of credit card intro APRs: Balance transfer APRs and purchase APRs.
Intro APRs on purchases are straightforward; you simply spend on your card and pay no interest on the balance until the deal expires. Intro APRs on balance transfers have more moving parts. You typically have two to four months to complete the balance transfer if you want it to qualify for the 0% APR. If your intro APR is valid for 18 or 21 months, you still need to transfer the balance shortly after getting approved for the card; otherwise, you'll pay the standard balance transfer APR.
Credit card balance transfers are also subject to balance transfer fees. These fees can be 4% to 5%, but certain cards, such as the Citi® Diamond Preferred® Card, offer intro balance transfer fees of 3% of each transfer ($5 minimum) completed within the first 4 months of account opening; after that, 5% of each transfer ($5 minimum). Just like with the intro APR, you have to complete the transfer within a certain amount of time to take advantage of the lower fee.
The Citi® Diamond Preferred® Card has an exceptionally long intro-APR for balance transfers and is also notable for its reasonable 3% intro fee for balance transfers.
- One of the longest intro-APR offers for balance transfers
- Lower intro balance transfer fee
- No annual fee
- No rewards
- No welcome bonus
Highlights
Highlights shown here are provided by the issuer and have not been reviewed by CNBC Select's editorial staff.
- 0% Intro APR on balance transfers for 21 months and on purchases for 12 months from date of account opening. After that the variable APR will be 16.49% - 27.24%, based on your creditworthiness. Balance transfers must be completed within 4 months of account opening.
- There is an intro balance transfer fee of 3% of each transfer (minimum $5) completed within the first 4 months of account opening. After that, your fee will be 5% of each transfer (minimum $5).
- No Annual Fee - our low intro rates and all the benefits don't come with a yearly charge.
- Buy now and pay later. Split your payment for eligible purchases of $75 or more into a fixed payment with Citi® Flex Pay.
- Get free access to your FICO® Score online.
Balance transfer fee
There is an intro balance transfer fee of 3% of each transfer (minimum $5) completed within the first 4 months of account opening. After that, your fee will be 5% of each transfer (minimum $5).
Foreign transaction fee
3%
While it's rare, you can find credit cards with no balance transfer fee, but the intro APR isn't always 0%. These cards are typically issued by credit unions, which may have strict membership requirements, such as military membership or employment with certain companies.
Balance transfer fees eat into your savings, but if the intro APR period is long enough, the savings can still be worth it. The biggest thing to keep in mind is that once the intro APR ends, you start paying the standard APR.
It's a good idea to put together a plan to pay off the balance before you start paying interest. Lots of budgeting apps can help with this. Personally, I've used You Need A Budget (YNAB) for years and love it, but any budget app or system that helps you track and prioritize your spending should help.
You Need a Budget (YNAB)
Cost
34-day free trial then $109 per year ($9.08 per month) or $14.99 per month (college students who provide proof of enrollment get 12 months free)
Standout features
Instead of using traditional budgeting buckets, users allocate every dollar they earn to something (known as the "zero-based budgeting system" where no dollar is unaccounted for). Every dollar is assigned a "job," whether it's to go toward bills, savings, investments, etc.
Categorizes your expenses
No
Links to accounts
Yes, bank and credit cards
Availability
Offered in both the App Store (for iOS) and on Google Play (for Android)
Security features
Encrypted data, accredited data centers, third-party audits and more
Terms apply.
Credit score requirement
One of the biggest hurdles to clear with intro APR credit cards is the approval guidelines. Nearly all of the top intro APR cards require a good to excellent credit score. If your FICO Score isn't 670 or higher (ideally 700+), then you may have a tough time being approved for a zero-interest card.
This makes it potentially difficult to use a 0% credit card to pay off debt, as having large amounts of debt can hurt your credit score.
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Credit limit and transfer restrictions
When you apply for a credit card, you won't know your credit limit until after you're approved. That means there's a risk that you aren't approved for a high enough limit to transfer your existing balances.
You typically aren't able to request credit limit increases for anywhere from two to six months after opening a card, and at that point, balance transfers may not qualify for the intro APR.
Banks can also impose additional restrictions on the amount you can transfer. Depending on the financial institution, you may only be able to transfer up to a fixed amount or up to a percentage of your credit limit (generally around 75% to 90%). These limits can make balance transfer cards less useful if you have a large amount of debt.
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