Should you use a 0% intro APR card to cover a financial emergency?

Unfortunately, many people aren’t. 

Fifty-seven percent of U.S. adults are currently unable to afford a $1,000 emergency expense, according to Bankrate’s Annual Emergency Fund Report. The report also found that 25% of respondents would take on credit card debt to pay for an emergency expense and pay it off over time. 

Experts often advise against relying on credit cards to cover an emergency. But does it ever make sense to do so? And what kind of credit card should you use? Ideally, you should aim for a card with low or zero interest. 

What is a 0% intro APR card? 

When you apply for a new credit card, the terms, rates, and fees associated with that card will be clearly outlined for you, with the most prominent figure being your card’s annual percentage rate (APR). 

Reminder: The APR on a credit card is the interest rate expressed as the rate for one year. When comparing cards, you might use this number as a deciding factor in which card you select. In some cases, your APR may even start off at zero. 

Typically, when you carry credit card debt month to month, you’ll pay interest on that balance. However, it’s not uncommon for banks to offer an introductory 0% APR on purchases or balance transfers (or both) for the first year or two after you’re approved for a new card. A 0% APR differs from your credit card’s usual terms in that it lets you avoid accruing interest on your balance during the intro period. Once it ends, your rate will increase to the APR outlined within your card agreement. 

Using a 0% APR credit card in an emergency

An interest-free period may sound like a great deal. And it often is for consumers who want to finance large purchases and cut down on long-term interest costs. For some Americans, a credit card can also serve as a financial lifeboat in an emergency. 

“If someone has an emergency situation where they need money to pay a creditor, vendor, etc., there are a few choices to get the problem resolved quickly. If you don’t have the money, but have credit, then it could be a good idea to utilize it,” says Stuart Boxenbaum, a certified financial planner and president of Statewide Financial Group. “If you have a credit card with a 0% APR, that is an even better situation.” Boxenbaum noted that the most important thing with promotional interest rates is to pay off your balance as soon as possible, before any interest is charged. “If it’s likely that won’t be a problem, this is the best choice,” he notes.

It’s important to understand that introductory periods do not last forever, and eventually, your credit card’s regular APR will kick in. If you aren’t able to get your balance down to zero before your issuer hits the brakes on your intro APR, you could end up in a cycle of unmanageable debt. Plus, carrying a hefty credit card balance in a high-interest rate environment could cost you even more. 

Plan for the unexpected

Credit cards can be great tools in a pinch. In an ideal situation, though, you wouldn’t have to borrow from your future self to cover an emergency today. Before you charge a surprise expense to your credit card, consider building a financial cushion that will cover you when the unexpected inevitably happens. 

1. Set a savings goal for your emergency fund. As a rule of thumb, experts generally suggest saving three to six months worth of expenses in your emergency fund. That may or may not be the right target for you. Think carefully about what your day-to-day expenses are, your family size, and how much you would need to get by should you or someone in your household experience a job loss or change in income. 
2. Add a line item to your budget for emergency savings. Once you know your target number, factor emergency savings into your monthly budget. Adjust the amount you’re saving each month to account for other financial goals, and make it a priority to save more after you’ve dipped into your savings to replenish funds quickly and ensure you always have enough to cover whatever may come your way.
3. Choose a high APY savings vehicle. It’s not all about how much you save—where you save it is just as important. There are several types of deposit accounts you might consider as a home for your emergency savings, all with varying fees, rates, and conditions. Aim to store your emergency funds in an account that will help your money grow, such as a high-yield savings account. 

The takeaway 

If you’re thinking about applying for a 0% intro APR credit card, it’s important to consider the terms of that promotional period and whether or not you can pay down your debt before the balance begins accruing interest. If you’re not confident you can, consider other ways of boosting your savings to pay for unexpected costs before you rely solely on your credit card.