Many advertisements for credit cards and auto loans these days proudly announce that they have a 0% APR (for an introductory period).

So what does 0% introductory APR on a credit card mean? Well, it does mean you can avoid paying finance charges during the introductory period, but you won’t avoid finance charges unless you pay off your balance in full before the end of the introductory period. If you don’t, then you’ll be charged interest on the entire balance. Also, if you are late on a payment during the introductory period, then the 0% APR could be nullified and you could be stuck with the regular APR.

Also, keep in mind that only a select group of people are eligible for the 0% APR offers. You must have a good credit score, and when buying a car, you often must have a significant down payment – typically at least 10%.

If you see a car commercial promoting one of these 0% offers and then you go to the dealership ready to sign on the dotted line, you may be surprised to find out that the 0% APR is not available to you. 

So approach 0% APR offers with a healthy dose of skepticism. If you’re eligible, and if you are confident you’ll be able to pay on time each month, then it could be a good deal for you depending on your circumstances. Otherwise, try to avoid getting caught up in the “hype” and signing up for something that will cost you a lot of money in the long run.

Knowing how APR works will give you the financial aptitude to make good decisions when getting a credit card, taking out a mortgage, or applying for a car loan. It will also help you avoid any 0% APR offers that might not be legitimate or trustworthy.