Here’s What Happens to Your Credit Score When You Get a 0% APR Credit Card

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Credit cards with an intro 0% APR period help you finance big purchases, but they can hurt your credit score. Find out what could happen here. 

For those planning to purchase big-ticket items soon, a 0% intro APR credit card could be an appealing way to finance them. These cards come with a period of 0% interest, sometimes for as long as 15 to 21 months, during which you won’t incur interest charges on unpaid balances. This gives you plenty of time to pay off what’s owed before the 0% intro APR period ends and the high interest charges commence.

That said, charging large purchases to a 0% intro APR credit card isn’t without its risks. You may not be paying high interest, but you could be taking a hit to another part of your finances — your credit score. If you need good credit right now, a 0% intro APR credit card may not be the best decision. Here’s why.

Large purchases can weigh down your credit utilization

Credit utilization measures how much credit you’re using versus how much is available to you. For instance, if you have three credit cards with $20,000 in available credit, a balance of $5,000 would mean you’ve used 25% of your total credit. While it’s advisable to keep your credit utilization below 30%, higher FICO® Scores tend to belong to those who have even lower utilizations.

This is where charging large purchases to a 0% intro APR credit card could cause some trouble. Sure, you may not pay interest for a limited period. But you’ll bring up your credit utilization, effectively bringing down your score. The damage isn’t permanent, but it could affect your personal finances in the short term.

For instance, if you’re using $1,000 of your $20,000 in available credit, your credit utilization would be 5%. If you added a credit card with a $5,000 credit limit and charged up to the limit, you would be using $6,000 of $25,000, which is now 24%. Quadrupling your credit utilization in this way could cause your score to drop by double digits.

Expect a minor credit score drop from the hard inquiry

Whenever you apply for a new credit card, you authorize a hard inquiry on your credit report. Hard inquiries stay on your report for two years and could cause your score to drop by 5 to 10 points. The dip is temporary, but if you’re applying for multiple credit cards in a short period, it could be more than you’re willing to stomach.

Make a plan to avoid setting yourself up for more damage later

Finally, it’s important to remember that the 0% APR period doesn’t last forever. When it ends, your purchases will start accruing interest at your card’s regular APR. Your monthly payments could be substantially higher, which could overwhelm you and risk putting you into credit card debt.

One way to avoid debt is to make a repayment plan before you open the card account. Knowing how much you can pay per month, as well as the date when you’ll have the card paid off, could go a long way toward helping you improve your credit score. For instance, if you’re charging $5,000 to a card with 15 months of 0% interest, you should pay at least $350 monthly to pay off the balance before the period ends. If you can’t do that, you may want to reconsider the purchase.

All in all, credit cards with 0% intro APRs can be a smart tool to finance purchases, especially if you’re in an emergency situation. Just proceed with caution and be prepared for a dip in your credit score. As long as you pay off what you borrow, your score will rebound — and you won’t have to lose money to high-interest debt.

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