Credit Cards With 0% Introductory APRs Get You Into Debt The Trick
A credit card that offers 0% interest may feel like a financial reset button. You know the drill: Buy now, pay later, with seemingly no penalty.
But while these tire-rated cards sell the illusion of breathing room, Americans accumulate credit card debt records and carry balances that last long after the so-called “free” period ends.
According to new data from the Consumer Financial Protection Bureau, the credit card’s average annual percentage rate, or APR, reached 25.2% by 2024 for standard cards and 31.3% for store cards. In the same year, consumers paid a record $160 billion in interest costs (up from $105 billion in 2022) and another $31.3 billion in fees. Meanwhile, about 15% of cardholders now make only a small payment each month — the highest share in at least a decade.
Another reason those balances seem stubborn is the rapid growth of credit cards that offer 0% introductory APRs.
By 2024, cards with 0% promotional interest rates account for $899 billion in purchases and $352 billion in balances at the end of the year, according to the CFPB. That’s about one-third of all card and revolving credit use.
While these increases may temporarily reduce the cost of carrying a balance, the CFPB found that accounts with rates that use snapshots tend to have higher long-term balances than cards that don’t.
The problem is that many people do not use the introductory period to withdraw their balance. Only about 21% of cardholders with 0% APR increases pay off their balances in full before the end of the promotional period. And the majority (79%) carry the balance before the deadline, when interest starts – often at rates above 25%.
“Zero percent APR cards encourage overspending because there’s no immediate need,” Eric Croak, a certified financial planner and president of Croak Capital, told Money. “Once the interest is eliminated, time becomes infinite. Spending $4,000 over 15 months doesn’t sound too bad when you break it down into $267 payments. The purchase price doesn’t change, but your perspective does.”
Card issuers don’t rely solely on low interest rates to attract people. About two-thirds of credit card offers have 0% introductory APRs and include a rewards-based welcome bonus, usually tied to a spending limit that must be met in the first few months. Almost all of these cards don’t charge an annual fee, which can reduce the perceived cost of opening – and using – a new account.
The result, the CFPB notes in the report, is that these promotions encourage people not only to open new cards but to continue using them well after the introductory period ends.
“Your brain sees the reward now, and your payoff is some unspecified time in the future,” Croak says. “Psychology changes actions quickly.”
Even after the promotional period ends, many cardholders stick around. About 83% of cardholders do not cancel their credit cards when the introductory APR period ends, which means less than 1 in 5 consumers close the account when the “free” loan period ends. More than half continue to use the card after the promotional period.
That persistence is important, because the same cards that encourage overspending often stay open after higher interest rates hit — allowing balances to lag and interest charges to accumulate.
“They give you time to ‘figure things out,’ but the truth is they let you forget,” Croak said. “There’s a psychological disconnect between spending money now and paying later that grows over time.”
More from Mali:
Americans Now Hold a Record $1.2 Trillion in Credit Card Debt
Debt Diaries: How These Three People Paid Off Tens of Thousands of Dollars in Debt
3 Warning Signs You Have Too Much Credit Card Debt
