Ways to strategically use low introductory APR credit card offers for large purchases
Quick insights
- Some credit cards offer a temporary reduced interest rate, potentially allowing cardmembers to make large purchases while helping to minimize interest.
- To help limit interest charges, the cardmember usually needs to pay the balance in full before the promotional period ends.
- Creating a payoff plan, knowing the terms and fees and making timely payments are some ways to manage costs.
If you plan to make a large purchase like furniture or a laptop, you might be thinking about how you’ll finance it. A credit card with a low introductory annual percentage rate (APR) might be worth considering. These cards provide a promotional APR—the interest rate charge on credit card balances—during a set introductory period. You may be able to save on interest charges if you pay off the balance before the promotion ends and the higher standard APR applies.
While these cards may be useful spending tools, it may be a good idea to have a plan to pay off the purchase before the promotional offer ends.
Below, we cover some things to consider about making large purchases with low introductory APR credit cards, including how to help manage unwanted fees and interest charges.
Steps to pay off large purchases with low introductory APR credit cards
When using a low introductory APR card offer to make a large purchase, it may be helpful to consider budgeting measures. Here are some strategies for making the most of this type of credit card offer.
Understanding the terms
Some credit cards may offer a low APR during an introductory period, generally ranging from 12 to 18 months. This promotional APR may apply to purchases, balance transfers or both, but usually excludes cash advances. After the promotional period, any remaining balance will accrue interest at the card’s standard APR.
Some credit cards—especially store or retail cards—may charge deferred interest if you have a balance after the introductory period. In that case, all the interest that you would have accrued under the standard APR during the promotional period is added to your balance. The cardmember agreement and offer include detailed information about terms and conditions, such as whether the card charges deferred interest.
Creating a payoff plan
Creating a plan to pay off your purchase before the promotional APR ends could help you limit interest charges. The plan may include the timeframe for paying it off and the monthly payment amount, as well as plans for integrating the credit card payment into a monthly budget.
Let’s say Stephen opens a low introductory APR credit card account to make some major home appliance upgrades, including a new refrigerator, washer and dryer. When his credit card arrives, he buys the appliances. The card’s promotional APR lasts for 18 months.
In order to pay off the balance in full and help minimize interest charges, Stephen determines the monthly payment needed to pay off the appliances within the 18 month promotional period. He adjusts his monthly budget to account for these payments and then sets up automatic monthly payments from his checking account. He regularly monitors his account to help ensure timely payments are made.
Making timely payments
Some low promotional APR credit cards have a high penalty APR. In these cases, a missed credit card payment may cause the penalty APR to replace the low APR going forward. After a missed payment, the penalty APR might even apply to the existing balance if the cardmember goes 60 days without making their account current. Late fees might also apply.
Knowing the fee structure
While a low introductory APR credit card could help save you money on interest charges, there’s still the potential for credit card fees. Understanding the card’s fee structure might help you avoid unwanted or unexpected charges.
Here are a few of the fees you may want to be mindful of:
- Annual fee: Some cards charge a fixed fee every 12 months (these types of credit cards typically offer more benefits).
- Late payment fee: A late payment—in addition to triggering a penalty APR—might result in a fee.
- Returned payment fee: This fee may apply if your payment bounces.
As always, check your cardmember agreement for fees that apply to your specific credit card account.
Planning ahead may help you reduce or even avoid some fees. For example, setting up automatic payments might help you avoid late payments and budgeting for your monthly credit card payment might help you avoid returned payments.
If the card charges an annual fee, it’s typically required unless it’s temporarily waived as part of the promotional offer. If your goal is to limit costs, you may want to consider cards with low annual fees. However, if a specific card’s rewards and benefits match your usage, the annual fee might be worthwhile.
Avoiding new debt
Once you’ve made your intended purchase and established a plan to pay it off, it may be tempting to make new purchases on the low promotional APR credit card. If you don’t have a plan to pay off these additional purchases before the promotional APR ends, that could increase your credit card debt and result in interest charges.
In summary
Low introductory APR credit cards offer a way to make a large purchase while helping to limit interest charges for specified time period. A few steps you could consider to pay off larger purchases with a low promotional APR credit card include:
- Creating a detailed payoff plan
- Budgeting to account for your monthly credit card payment
- Making on-time payments, possibly through automatic payments
- Not taking on new debt
Understanding the card’s terms and fees and using it wisely could potentially help you avoid additional unwanted fees and charges.
