What are the Benefits of an Introductory APR?

When looking for a new credit card, there are endless special offers marketed to entice consumers. It’s important to distinguish these promotions and read all of the fine print, however, before applying for the ideal card that meets your needs. 

One such offer is an introductory APR period, which presents clear advantages to the cardholder when it comes to interest charges. To fully benefit from an introductory APR offer, it helps to understand the specific terms, which are unique with every card. Outlined below are the benefits and potential risks you can take into account when comparing the many offers available.

An introductory APR is a low interest rate, sometimes even 0%, offered for a fixed period on a new credit card account. For a set length of time (at least six months, but as high as 21 months), the cardholder will not have to pay any interest on purchases, balance transfers, or both, depending on the specific offer. In other words, a person does not have to pay off their statement balance in full to avoid interest charges. In most cases, the user will have to make at least a minimum payment every month or two months to keep the introductory APR active. 

As stated, introductory APRs are advantageous for balance transfers or to fund large purchases. Whether someone is looking to save money by transferring debt from a higher interest card, or they simply want to spread out the costs of a big transaction, an introductory APR provides a timeframe to do so without the hassle of compounded interest or late fees.

For balance transfers specifically, an introductory APR enables a consumer to move high-interest debt from one or multiple credit cards to their new card account, allowing them to pay off the balance with no additional interest or fees during the introductory period. Most balance transfers do charge a 3-5% fee, however, the amount is typically offset by the money a cardholder will save on interest, which can be hundreds or thousands depending on the debt balance. 

For new purchases, a cardholder has the benefit of spreading out the payment over every month (or billing cycle) during the introductory period, without having to worry about interest charges if they don’t pay their statement balance in full. Obviously, the longer the APR period, the more a cardholder can stretch the payments.

While the benefits speak for themselves, introductory APR rules differ from card to card. Before opening a new account, a consumer should understand where and when the APR offer applies. For example, while some cards offer an introductory APR on purchases and balance transfers, others may only offer the promotion for one of the two. In addition, the promotional period for purchases may be different than the period for balance transfers.

Furthermore, once the introductory APR period is over, the card’s standard APR will kick in, and will be applied to any unpaid balance. In some cases, penalty fees are levied on lingering debt. As a result, a consumer may want to take full advantage of the introductory APR and pay off the debt in full, whether it’s from a balance transfer or new purchase, if the original goal was to avoid interest and fees altogether. 

An introductory APR can be a great option for balance transfers, as far as saving money on interest that might otherwise be mounting up with higher interest credit cards. Equally, if a great deal comes along, but a person’s current savings don’t quite cut it, an introductory APR promotion could come in handy in devising a payment plan. However, these scenarios only work if the math adds up, and if the user is confident they can uphold their end of the card’s terms.