How credit card promotional interest rates work

Promotional interest rates are limited-time annual percentage rates (APRs) offered to credit cardholders. If a promotional rate is offered to a new cardholder, it might be called a teaser rate or introductory rate.

A promotional rate could be as low as 0%. After the promotional period ends, the card’s standard APR will apply to new purchases and any remaining balance.

What you’ll learn:

• Promotional interest rates last for a limited time and may apply to balance transfers, purchases or both. 

• Promotional interest rates must last at least six months, but they often last longer.

• It’s possible to end a promotional period early and trigger a higher-than-standard penalty APR by doing things like making a late payment. 

• Deferred interest offers are another type of promotion, but they’re different from promotional rates.

Credit card promotional APRs are temporary interest rates that card issuers offer to cardholders. Promotional rates may be lower than usual or even 0%. And the promotional rate might apply to purchases, balance transfers or both. The card’s terms and conditions will specify what kinds of transactions the promotional rate applies to.

Offers for new cardholders are referred to as introductory rates or intro rates, for short. But issuers can also offer promotional rates to existing cardholders.

By law, promotional interest rates have to last for at least six months. But they often last 12 to 21 months. When the promotional period ends, the card’s standard APRs will apply. Credit cards often have multiple APRs that vary based on the transaction and how the card is used. 

It’s also possible to prematurely end the promotional interest rate and trigger a higher-than-standard penalty APR by doing things like making a late payment.

Although promotional APRs and deferred interest offers could both help you save on interest, they’re not the same. 

The biggest difference is how interest is calculated if the balance isn’t fully repaid before the promotional period expires. Promotional APRs typically apply interest only to the remaining balance. Deferred-interest promotions may charge all the interest that’s been accruing from the original purchase date.

Here’s how they compare:

As with any financial decision, it’s important to consider the potential pros and cons of applying for a credit card with a promotional interest rate offer.

There are a number of possible advantages of promotional interest rate offers to consider, including:

• Interest-free borrowing: A major perk of a credit card promotional interest rate offer is that qualifying transactions accrue little or no interest during the promotional period. 

• Debt consolidation: Credit cards with promotional interest rates may offer an opportunity to consolidate high-interest debt and pay it down faster or allow more time to pay for a major purchase without accruing interest.

• Access to credit card rewards and benefits: You may also get to enjoy any rewards and benefits that come with the card.

Here are a few things to think about before accepting a promotional interest rate offer: 

• Post-promotion interest rates: Promotional interest rates don’t last forever. Plus, if you do things like make a late payment, you may end the promotional period early and trigger a higher-than-standard penalty APR. 

• Fees: If you’re planning to use a promotional interest rate offer to transfer balances from another credit card issuer, make sure to consider how transfer fees could affect your budget and repayment plan. 

• Hard credit pull: If you’re applying for a new card, it typically triggers a hard inquiry, which can cause a temporary dip in your credit scores.

Whether you’re researching an offer for a promotional rate or deferred interest, the Consumer Financial Protection Bureau has some things to keep in mind:

1. Debt: Like any other credit card, you have to repay the money you spend with a promotional interest credit card, even if it’s temporarily interest-free.

2. Limited timing: Promotional interest rates are temporary. Take note of when the offer begins and ends. 

3. Standard APRs: Standard rates are higher than promotional rates.

4. Terms and conditions: Reviewing the details can help you understand how the promotional interest rate works, which transactions it applies to and what happens when the promotional period ends. 

5. Monthly payments: If you want to pay off the card’s entire balance before the promotional period ends, determine how much you need to pay each month to do so. Typically, making only the minimum payment won’t cover the entire balance.

Promotional interest rate offers last only for a limited time. By law, they must last at least six months, but they may go on longer. And once the promotional period ends, the card’s standard APRs will apply. 

If you’re interested in learning more, you can compare low intro rate credit cards from Capital One and check if you’ll be approved for a card with 100% certainty. It’s quick and won’t hurt your credit scores.