Credit Card Introductory Rates

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Special introductory rates are some of the best credit card offers available. An introductory rate is a low interest rate—often even a 0% rate—that applies for a limited period of time after you open your credit card. Introductory rates are most often given to applicants with good or excellent credit scores, and the annual percentage rate (APR) that applies after the introductory period ends is based on your creditworthiness.

Introductory rates may apply only to a certain type of credit card debt—such as new purchases or balance transfers. However, many credit cards apply the introductory rate to both purchases and balance transfers. For example, the Wells Fargo Platinum Visa offers a 0% annual fee for 18 months on either of those types of credit card debt.

Cash advances rarely, if ever, get an introductory rate. The credit card issuer typically begins charging interest immediately.

Important Time Frames

By law, introductory rates must last at least six months. It's not unusual to see credit cards with introductory rates that last 12 months or even as long as 18 months for eligible transfers. One credit card that offers the latter time period for its 0% introductory rate is the Citi Simplicity.

Credit card issuers tend to use "months" and "billing cycles" interchangeably in their introductory rate offers. Card companies are required to make the due date the same day each month. Because months contain different numbers of days, the length of billing cycles will also vary.

When you accept a credit card with an introductory rate, make sure you pay attention to the total length of the introductory period. That way, you can focus on paying off your balance before it ends.

Divide the balance you want to pay off by the number of months in the introductory period to determine the monthly payment you will have to make. For example, to pay off a $4,000 balance during an 18-month interest-free promotion, your payments would be $222 a month.

You also should check the credit card agreement to see whether you have a limited period of time in which to carry out any balance transfers. For instance, you must complete bank transfers to the U.S. Bank Platinum Visa within 60 days of opening your account to receive the 0% introductory APR. Any balance transfers made after that date will be charged the standard APR, which ranges from 13.99% to 23.99%, depending on your creditworthiness.

Strategies for Using the Card

Introductory rates are attractive because they allow cardholders to pay less in finance charges than they would on a credit card with a higher interest rate. It often makes sense to transfer a large balance from a high-interest-rate card to an introductory rate card. You might also use an introductory rate card to make and pay off a large new purchase without incurring interest.

Card issuers often charge a fee for balance transfers, even on introductory rate cards. A fee of 3% of the transferred amount is typical.

Losing Your Introductory Rate

Your introductory rate can expire prematurely if you are late making a payment, have your check returned, or exceed your credit limit. If any of those things happen, your card's APR may increase to the penalty rate—a very high rate, perhaps as much as 29.99%—on new transactions. If you're 60 or more days late making a payment, the penalty rate may be applied to existing balances as well. However, your credit card company can legally increase your APR within the first year of having issued you the card only if you are 60 or more days late. 

Unfortunately, once you've lost your introductory rate, you may not be able to get it back. And the late payment will go on your credit report, which may prevent you from qualifying for an introductory rate on another credit card.

You can set up automatic payments for the minimum payment amount to avoid being late. And you can always make an additional payment above the minimum at any time.

Deferred Interest Offers

There's a type of interest rate promotion that can easily be confused with an introductory rate. Some card issuers—including retailers—offer a deferred interest plan that allows you to pay no interest on purchases for a certain number of months. But there's a catch. You must pay off your full balance before the promotional period ends. If any of the balance remains when the promotional period expires, you'll be retroactively charged interest from the date of a purchase.

Using the Card After the Rate Expires

You can still use your credit card after the introductory rate expires, however any unpaid balance will be charged interest based on the regular APR. Because you're paying more interest on your card debt, your prior payment amount won't have the same impact on your overall balance. Therefore, if you still want to pay off your balance after the introductory rate expires, you'll have to increase the monthly amount.

Article Sources

  1. Wells Fargo. "Wells Fargo Platinum Card." Accessed May 27, 2020.

  2. Bank of America. "What Is a Credit Card Cash Advance?" Accessed May 27, 2020.

  3. Consumer Financial Protection Bureau. "How to Find the Best Credit Card," Page 2. Accessed May 27, 2020.

  4. Citi. "Low Intro Balance Transfer Offer." Accessed May 27, 2020.

  5. Consumer Financial Protection Bureau. "The Consumer Credit Card Market," Page 67. Accessed May 27, 2020.

  6. U.S. Bank. "U.S. Bank Platinum Visa Card Terms and Conditions." Accessed May 27, 2020.

  7. Consumer Financial Protection Bureau. "How to Find the Best Credit Card," Page 3. Accessed May 27, 2020.

  8. Consumer Financial Protection Bureau. "How to Find the Best Credit Card," Page 4. Accessed May 27, 2020.

  9. Experian. "What Is a Penalty APR?" Accessed May 27, 2020.

  10. Consumer Financial Protection Bureau. "I Got a Credit Card Promising No Interest for a Purchase If I Pay in Full Within 12 Months. How Does This Work?" Accessed May 27, 2020.