0% credit card intro rate offers: The pros, cons and what lenders are banking on

Nothing can grab a borrower's attention faster than a 0% interest rate — especially if someone's juggling credit card debt with rates of 20% or higher.

Those with good to excellent credit should have no trouble finding a 0% rate credit card, even in light of record high average rates for credit cards, according to Ted Rossman, senior industry analyst for CreditCards.com and Bankrate.com.

A 0% rate remains a big marketing tool for credit card issuers, even after the Federal Reserve has spent more than two years raising interest rates and keeping them high to battle inflation.

Why are banks and credit unions still offering 0%? Well, the odds are good that you'll underestimate how quickly you could pay off that debt — and you will get stuck with high credit card rates once again. The lenders typically get a fee for a balance transfer, and they lure customers away from competitors.

"Once the clock expires, about half of those interest-free customers convert into very profitable interest-paying customers," Rossman said.

The average rate for all credit cards is now 20.68%, according to Bankrate.com data. By contrast, the average rate for all credit cards was 16.3% in at the start of 2022, before the Federal Reserve began raising interest rates.

And many store-branded credit cards are at annual rates of nearly 30% or 35%.

The buzz phrase when it comes to interest rates these days is "higher for longer."

Anyone who is banking on seeing their credit card rates fall significantly in six months or so, once the Fed begins cutting interest rates, is going to be sadly disappointed. Even if the first rate cut hits in September, and some say it might not take place until December, interest rates will gradually pull back, not plummet, from here.

Shopping around to snag an introductory rate of 0% could indeed make sense — if you stop spending and aim to pay off as much of the credit card debt as possible in less than a year or two.

Credit card balances sit at $1.12 trillion, up 13.1% from a year ago, according to data for the first quarter from the Federal Reserve Bank of New York. Delinquency rates on credit cards have edged up in the past year, too, hitting 3.16% in the first quarter — the highest level since early 2012 and up sizably from the 2.45% level for the first quarter in 2023.

The 0% intro rate has been popular for several years now, and many banks are limiting their risk by seeking consumers with good credit.

About a quarter of credit card debt had an introductory rate about five years ago, in many cases a 0% annual percentage rate for nine months to more than a year, according to a working paper issued last year by researchers at Federal Reserve Bank of Philadelphia and the Federal Reserve Bank of Boston.

And the report noted that nearly half of the promotional debt involved transferring balances that had already accumulated on other credit cards.

Consumers tend to underestimate how high the interest rate will go up in the future often because they wrongly expect that they will borrow less in the future, according to the study. And, as a result, consumers will flock to 0% but pay little attention to the details and the reset rate.

The “irrational behavior” on the part of borrowers gives lenders — who are in search of profits — an incentive to offer temporary 0% rates, the research concluded.

Maybe, you'd use that 21 months to pay off your debt entirely. But the odds are high that you're still going to be carrying debt once the introductory rate ends. And the annual interest rate could be 18.24% or 19.24% or much higher, depending on the offer and your credit.

Some rates could skyrocket to 28.99% or 29.99% from that 0% intro offer.

Banks don't seem particularly worried about an uptick in credit card delinquencies, as the jobless rate remains low.

"Right now, more people are carrying more credit card debt for longer periods of time — and they're actually paying it back," Rossman said. "This is a 'Goldilocks' scenario for card issuers."

Who will get a 0% offer

You're only likely to receive a prescreened offer or qualify for a 0% introductory rate if you have good-to-excellent credit. Often, Rossman said, you'd need a credit score of 670 or higher.

Many people are right in the ballpark, though, he said, given that the national average is 717, according to FICO.

Key points: You must be current on your old credit card if you're trying to transfer the balance on that card to another card with a 0% introductory rate. And often you'd only be able to transfer a balance from a credit card issued by another bank, not a credit card issued by the same bank that's offering the promotional rate.

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Not all 0% offers are the same

Pay close attention to how long the intro rate applies to new purchases and how long it applies to balance transfers. It might matter if you planned to open the card to use to buy an appliance or cover upcoming car repairs. In some cases, you might get a longer time for the 0% intro rate on a balance transfer.

Some introductory periods might be 15 months or 18 months or as high as 21 months.

Several major issuers offer 0% intro rates now, including Bank of America, Capital One cards, Chase Slate Edge, Citi Diamond Preferred, Wells Fargo Reflect, U.S. Bank Visa Platinum, Blue Cash Everyday Card from American Express, the "Discover it" card and others.

What happens if you try to combine 0% intro rate and rewards?

You might end up with a shorter introductory rate on purchases if you're chasing rewards. Locking in the lowest interest rate for as long has possible is the name of the game if you're trying to save money and get out of debt.

What is the balance transfer fee?

Yes, it's not free to transfer a balance from a higher rate credit card to a 0% intro rate card. These days, you'd pay a balance transfer fee of 5% — a minimum of $5 — if you're transferring a balance to a Wells Fargo Reflect Visa or a Citi Simplicity Credit Card. On a $3,000 balance transfer, you're looking at a fee of $150.

Some cards have a 3% balance transfer fee. The Discover promotion notes that the card has a 3% intro balance transfer fee until Sept. 10 but the fee will go up to 5% for future balance transfers.

Pay attention to the fee, as well as other features, when shopping around for a 0% offer that fits your needs.

How quickly do you need to transfer the balance?

The 0% rate might apply for 12 months or 21 months, depending on the offer, but understand that you might have a much shorter window to transfer balances from higher rate cards to your new card. Often, the window is four months or so.

For example, the Citi Simplicity card notes that the balance transfer fee applies to the transfers completed within four months of account opening.

What's the available line of credit?

You might like to transfer $7,000 or $8,000 in high-cost credit card debt to a card with a 0% intro rate. But you might only qualify for a credit limit of around $5,000 or much less. Smaller credit limits would be extended to those who have a lower credit score or a lot more debt.

Remember, 0% doesn't mean that you don't need to make a monthly payment.

A Wells Fargo promotion talks about how credit card borrowers can "take a break from interest for 21 months" and find a way to "gain more ground financially."

But you cannot take a break from paying down your debt — especially if you're looking at thousands of dollars in credit card debt.

The average credit card balance is $6,218 according to TransUnion. If you transferred $6,218 to a 0% card, you'd likely be looking at a minimum monthly payment that starts at $62 a month, Rossman said. That's based on 1% of the balance.

Pay off what you owe while your rate is low

If you paid $62 a month for 21 months, for example, you'd only pay off roughly $1,300 or less out of a hypothetical $6,218 balance, Rossman estimated.

If you're paying as little as possible toward your debt, you're still going to be buried in credit card debt whenever that 0% term ends.

If you wanted to avoid interest charges, you'd need to come up with nearly $5,000 during the last month or two before the 0% rate ends to pay off the bill. Or you'd end up paying 18% or 20% or more in interest on that old debt.

Better strategy: Figure out how to pay roughly $300 a month each month if you transfer $6,218 to a card that offers an intro rate of 0% for 21 months. Look at the payment it would take each month to clear your debt off the books before the 0% introductory time ends.

"Don't add new purchases, either, since it's hard to hit a moving target," Rossman said.

Contact personal finance columnist Susan Tompor: stompor@freepress.com. Follow her on X (Twitter) @tompor.