Credit card introductory APRs, explained
Quick insights
- An introductory Annual Percentage Rate (APR) is a temporary, reduced APR offered to new cardmembers for a defined promotional period.
- A promotional APR may apply to new purchases, balance transfers or both depending on the specific offer.
- Maintaining on-time payments is often necessary to keep your promotional APR and avoid a penalty.
If you’re looking for a new credit card, you may find promotional offers with a limited-time introductory APR. A low introductory APR could seem tempting, but it’s helpful to be equipped with as much knowledge as possible before applying. Let’s learn more about introductory APRs and what other factors you may want to consider when picking a credit card.
What are introductory APRs?
An introductory APR is a promotional interest rate that credit card issuers offer to incentivize new cardmembers to apply for an account. Essentially, it is a temporary interest rate that lasts for a designated period of time from the date of account opening, and is often lower than the standard APR.
The main differences between an introductory APR and a regular interest rate are that introductory rates are typically fixed for the introductory period and only available for a limited time from account opening. The Standard APR generally is the ongoing APR that applies outside any promotional or introductory period and is usually variable, but could be fixed.
Eligibility for introductory rates
Now that you understand the introductory APR definition, you may be wondering who is eligible. Requirements will vary between cards and issuers, but in general you may find that cards with introductory APRs require you to be a new cardmember and have a good to excellent credit score.
Types of introductory APRs
Introductory APR means a reduced APR for a limited time. During that period, if the introductory APR is 0% on purchases, you won't be charged interest on those purchases as long as you follow the terms of the card and the introductory offer. Once the introductory APR period ends, the standard APR applies to any remaining balance as well as new purchases, and balance transfers.
What's more, issuers may also offer a low intro APR on balance transfers. This means, if the intro APR is 0% on balance transfers, you might not pay interest on the debt you move from another credit card to your new credit card. It’s a common strategy for those looking to consolidate higher-interest debt. When it comes to balance transfers, issuers may try to attract new customers by offering lower balance transfer fees. This means that issuers may offer a lower balance transfer fee for eligible transfers, often for a limited time. The fee is typically a percentage of the amount transferred (often with a minimum dollar charge).
What to consider before applying for a credit card with an introductory APR
While a card with an introductory APR can be appealing, consider a few key factors before you apply.
Restrictions
Reading the fine print can help you understand what the introductory offer is and what it applies to. For instance, a promotional APR may only apply to balance transfers and not new purchases made on a card, or vice versa. Sometimes the offer applies to both. It’s important that you understand which offer is being presented.
Fees
Although a credit card may offer an introductory APR, it usually still comes with the usual credit card fees. These can include late fees, balance transfer fees and cash advance fees.
Penalty APR
If you make a late payment, you may lose your introductory rate. If that happens, you could be subject to a penalty APR, which may be even higher than the standard APR of the credit card.
Possible pros and cons of introductory APRs
Depending on your personal situation, there may be various benefits and risks to getting a credit card with an introductory APR.
Pros
- Reduce debt: If you transfer a balance to a card with a lower APR, you may be able to reduce interest charges, which could help you pay down debt.
- Make large purchases: If you need to make a large purchase, such as a new appliance or furniture, and you don’t have all the cash on hand, an introductory rate credit card may be an option. You may be able to budget to pay off the purchase before the introductory period ends, which can help you avoid paying interest at the standard APR after the promo ends. During the intro period, you'll generally pay interest at the introductory rate (and if it's 0% intro APR, no interest during that period), as long as you follow the terms of the offer.
Cons
- Penalty APR: If your payment is late during an introductory period, you may be faced with a penalty APR, which is often higher than the card’s standard APR.
- Balance transfer fees: You may have to pay a balance transfer fee if you’re planning to use your introductory rate credit card to transfer balances from another card to help you pay down debt.
- Introductory periods end: Your remaining balance will start accruing interest at the standard APR as soon as the intro period ends. It can be helpful to keep close tabs on your calendar so you aren't surprised when the standard APR takes effect.
In summary
A credit card introductory rate is a temporary interest rate that is typically lower than a card's standard rate. This can make intro APR cards a helpful option if you’re looking to pay down existing debt or have a large purchase to make. However, like any financial decision, there may be risks involved. It can be helpful to know your card's terms and conditions and keep track of when your promotional period ends. You may want to check when the intro APR expires and what the standard APR will be at that time, because any remaining balance will start accruing interest at the standard rate once the promotion is over.
