What Are Introductory Credit Card Rates?

What Does 0% Introductory APR Mean?

When you open a credit card with a 0% introductory APR, interest is waived on certain transactions for a specific period. Once the promotional period ends, the card's regular APR takes effect and any remaining balance starts accruing interest.

The way you can use an introductory APR to your financial advantage depends on two key factors that can vary by offer:

• Qualifying transactions: The promotional interest rate may apply to purchases, balance transfers or both, depending on the credit card. Other transactions, like cash advances, will be charged interest at the regular APR.
• Introductory period length: The 0% intro APR typically lasts anywhere from six to 21 months; terms vary by issuer and transaction type. Some cards offer different timeframes for purchases versus balance transfers.

For example, let's say you make a $1,000 purchase with a credit card that offers an intro 0% APR on purchases for 12 months. If you pay it off during that introductory period, you won't owe any interest. If you only pay off $600 before the introductory period ends, however, the remaining $400 will start accruing interest at the regular APR.

Tip: Don't confuse a 0% intro APR with deferred interest. Deferred interest plans can retroactively apply interest to the entire original balance if you don't pay it off in time.

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How Payments Work During a 0% Introductory Period

Even during a 0% intro APR period, you still must make minimum monthly payments. Missing a payment may result in a late fee and loss of your introductory rate.

Some credit cards offer a 0% intro APR for balance transfers but not for purchases. In these cases:

• New purchases may accrue interest immediately, even if you pay on time.
• You typically don't get a grace period on purchases while carrying a balance from a transfer. You'll have to pay the full balance, including the transfer balance, to avoid interest.
• Payments often apply to lower-interest balances first, leaving higher-interest rate purchases to grow.

For interest-free balance transfers, avoid using the credit card for purchases until the transfer balance is completely repaid.

Tip: Look for a credit card that offers 0% intro APR on both purchases and balance transfers if you need flexibility.

Pros and Cons of Introductory Credit Card Rates

While there are several advantages to introductory credit card rates, there are drawbacks to consider.

Learn more: What Happens When Your 0% Introductory APR Ends

How to Save Money With Introductory Credit Card Rates

A little planning can help you make the most of a 0% intro APR:

• Read the terms. Make sure you fully understand the introductory rate—the expiration date, transactions it applies to, balance transfer fee and APR after the introductory period.
• Look for a long introductory period. An intro offer of 15 to 21 months gives you more time to pay off your balance and avoid interest.
• Use for large purchases. Use the flexibility to pay for big purchases over time without paying any interest.
• Transfer high-interest debt. Save on interest costs by reducing your debt during the introductory period. Compare the savings to any balance transfer or annual fees.
• Make a payment plan. Divide your balance by the number of months in the introductory period to determine how much to pay monthly to avoid interest.
• Be cautious with spending. Don't charge new purchases on a balance transfer card unless the introductory rate covers both.

The Bottom Line

An introductory 0% credit card rate can be a smart financial tool for consolidating debt or financing a major purchase. Keep in mind that these offers are temporary and discipline is important for avoiding debt. Always check your credit score before applying to see where it stands and read the terms carefully to avoid surprises.