Introductory rate: What it is and how it works
An introductory rate is a lower-than-normal interest rate offered to new credit cardholders. It’s a kind of promotional annual percentage rate (APR), and you might see the term shortened to “intro rate.”
What you’ll learn:
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A credit card’s intro rate typically applies to new purchases, balance transfers or both.
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Intro rates are temporary. Once they expire, standard rates typically apply to new purchases and any remaining balances.
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Intro rates can be as low as 0%, but they might be higher depending on the applicant, the issuer and the card.
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Lower interest rates can help with paying off debt faster or financing a large purchase.
What is an introductory rate on a credit card?
An introductory rate is a temporary, promotional APR on a credit card. An introductory APR offers new cardholders a lower-than-usual interest rate for a specified period.
When the introductory period is over, the standard APR takes effect and may be applied to any outstanding balance.
How long does an introductory rate period last?
By federal law, intro APR periods must last at least six months. But they might last longer. For example, Bankrate says 0% intro rates commonly last 12-21 months. And according to the Consumer Financial Protection Bureau, card issuers can cancel introductory rates if cardholders are more than 60 days behind on minimum payments.
What transactions do introductory rates apply to?
An intro APR may apply to new purchases, balance transfers or both.
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Introductory APR on purchases: Credit card purchases won’t be charged interest during the promotional period. When that period ends, the standard APR will apply to new purchases and to any remaining balance.
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Introductory APR on balance transfers: A low intro rate could help you avoid interest if you transfer a balance from another issuer. Once the promotional period is over, the standard APR will typically apply to the remaining balance.
Most of the time, introductory rates don’t apply to cash advances.
What to consider before applying for a credit card with an introductory rate
Here are a few things to think about when it comes to intro APR offers:
Qualifications and restrictions
Like getting approved for a card, intro rates can be based on creditworthiness. In general, the higher your credit scores, the easier it may be to secure a low intro rate.
Fees and penalties
An intro APR offer doesn’t mean there are no fees. There could be an annual fee for the card itself or fees that depend on how you use it. Here are two examples:
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Balance transfer fees: Some cards may charge a fee to transfer a balance to a new issuer. Bankrate says they’re typically 3%-5% of the transfer amount.
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Late payment penalties: Missing or late payments may result in late fees and an early end to the promotional APR period. And in some cases, late payments lead to a penalty APR, which is higher than the standard APR.
Timing and terms
If you’re planning to pay off your entire balance before it ends, creating a budget based on the promotional period could help you reach that goal. And be aware that missing a payment could end the introductory APR early and trigger a penalty APR.
Once the promotional period is over, paying off your balance on time every month can help you avoid paying interest on new purchases.
Pros and cons of an introductory APR
Now that you know the basics about introductory rates, it might be clear how they could help you accomplish your financial goals. In general, the way you use a card will determine whether it’s helpful or not or whether it’s worth applying for a low intro APR card. Here are two example scenarios:
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Interest-free borrowing: Using a low-interest credit card could help you pay off a large purchase over time without being charged any interest. But promo rates are temporary. After the offer ends, unpaid balances are usually subject to the card’s regular APR.
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Balance transfers: Transferring a balance to a low intro rate card could help you save money, consolidate debt and simplify your monthly payments. When your debt accrues less interest over time, keeping up with your payments may help you pay it off faster. But to get started, you may have to pay a fee, typically 3%-5% of the transfer amount.
Introductory rate FAQ
Want to know more about introductory rates for credit cards? These frequently asked questions might help.
What does 0% introductory APR mean?
A 0% intro APR means the interest rate on qualifying balances is 0% during the introductory period.
Do you still have to make a minimum payment on a credit card with a 0% introductory rate?
Minimum monthly payments are still due on a credit card with an intro APR. If you pay less than the minimum, your payment could be considered late, which could affect your promotional rate.
What credit score do you need for a 0% APR credit card?
Credit requirements can vary depending on the card or issuer. But in general, higher credit scores could improve your chances of qualifying.
Does a credit card with a 0% APR help build credit?
A 0% introductory rate alone won’t impact your credit scores. But using any credit card responsibly could help you build credit over time. That means doing things like paying at least the minimum payment by the due date each month.
Key takeaways: Introductory rates
A credit card with a 0% intro APR could help you save money on interest and pay down debt. But it’s helpful to be prepared and know when your promotional period ends.
If you’re ready to take the next steps, you can explore low intro rate credit cards from Capital One and find one that fits your needs.
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