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Introductory credit card rates are a perk issuers offer to new cardholders, usually to incentivize opening an account and using it to make purchases. The temporary rate—often a 0% annual percentage rate (APR)—may apply to purchases you make with the card or balances you transfer to the card. Using promotional rates could help you save money, but you'll want to understand the fine print first.
What Is a 0% Introductory APR Offer?
There are a few important parts to every introductory APR offer:
- The promotional rate: The promotional rate isn't always 0%. But if you can, look for a 0% APR offer to avoid interest altogether for a while.
- The promotional period: Introductory rates can last for months, and the exact length of time will depend on your offer. When you compare offers, make sure this is a factor you consider. Your remaining balances will start to accrue interest once the promotional period ends.
- Qualifying transactions: A promotional 0% APR will generally only apply to certain transactions, such as purchases or balance transfers. If you use the card for a different type of transaction, such as a cash advance, that may still accrue interest.
There are other things to keep in mind as well. For example, if you don't at least make your minimum monthly payment, the card issuer may charge you a late fee and cancel your introductory rate.
How Your Monthly Statement Cycle Works
An introductory rate will lower (or bring down to zero) your interest charges, but it doesn't change how your monthly statement cycle works. You'll still need to make at least the minimum payment each month, or else face consequences.
An important thing to consider with any card that has a promotional rate is how and when interest accrues. Your new credit card may, for instance, have a promotional 0% purchase APR that applies when you buy things, but no such relief for interest charges on balances you transfer to the card. In this example, you won't be charged interest on your purchases until the end of the introductory rate, but any balance amount you transfer will immediately still start to accrue interest.
The opposite can happen if you open a balance transfer card that offers a promotional 0% APR on balance transfers but not on purchases. Unless you pay off the entire balance (from both the purchases and transfers) in full, you may lose the grace period on your account. As a result, your purchases can start to accrue interest daily.
When you make a payment, the credit card company may apply the minimum payment amount to the balance with the lowest APR, which could still leave you with the interest-accruing purchase balance. If you pay more than the minimum, the amount above the minimum gets applied to the higher-rate balance.
Some cards offer promotional 0% APRs on both purchases and balance transfers, which can help you avoid these situations.
How to Save Money With Introductory Credit Card Rates
Introductory 0% APR offers can save you money in several ways.
You could open a card with a promotional 0% purchase APR, use it for large purchases and pay off the balance during the promotional period without accruing interest. It may even be a better option than a personal loan if you're confident you can completely pay it off before the standard rate kicks in.
If you have interest-accruing debt, transferring it to a balance transfer card that has a promotional 0% rate will stop interest charges temporarily and help you pay off the debt sooner. Some cards have a balance transfer fee (often 3% to 5% of the amount you transfer), but the transferred balances won't accrue interest during the promotional period. As a result, a larger portion of your payment can go toward paying down the principal balance.
Keep Track of Your 0% APR Offers
While an introductory 0% APR promotion can help you save money, you'll still have to pay off the balance if you want to avoid interest. Figure out how much you'll need to pay each month to pay off the balance before your promotion ends, and keep track of your progress as you go. You may even want to budget to pay off the balance a few months early to give yourself wiggle room in case you fall off track.