Introductory rate: What it is and how it works

Depending on your situation, you might be interested in applying for a credit card with a low introductory interest rate—they’re sometimes referred to as credit cards with an intro rate or an intro annual percentage rate (APR). But exactly how do those cards work?

Learn more about intro rate credit cards. Plus, explore how you could use one to help meet your financial goals.

What you’ll learn:

• A credit card’s intro rate, or intro APR, is a promotional interest rate that’s typically set for new purchases or balance transfers. The intro APR period is typically between 12 and 21 months.

• Once an intro rate expires, a standard APR applies to new purchases and any remaining balance on the card.

• Intro rates can be as low as 0%. But they might be higher depending on the applicant, the issuer and the card. 

• New cardholders may use an intro APR as a way to pay off debt faster or to finance a large purchase.

APR refers to the annual interest rate that credit card issuers charge if you carry a balance. An introductory APR is a type of promotional APR in which new cardholders can get a lower-than-usual APR for a temporary period. 

When the introductory period is over, the standard APR will go into effect and the card’s standard rate could be applied to the outstanding balance.

An intro APR may apply to new purchases, balance transfers or both.

An intro APR is typically a limited-time offer. It might last from 12 to 21 months, according to Experian. 

By federal law, intro APR periods must last at least 6 months. But they can be longer. If you take advantage of an intro APR, be sure you know when it will end and when the standard rate will begin. 

According to the Consumer Financial Protection Bureau, card issuers can cancel introductory rates if cardholders are more than 60 days behind on payments.

If a card offers a 0% intro APR, it means the interest rate is 0% during the introductory period. Keep in mind, intro APRs aren’t always 0%. You might think of 0% when you hear “intro APR,” but actual rates can vary.

Here’s more information on how a 0% intro APR works for certain transactions. 

• 0% introductory APR on purchases: With a 0% APR, your credit card purchases won’t be charged interest during the promotional period. When that period ends, the standard APR will kick in and apply to new purchases and any remaining balances.

• 0% introductory APR on balance transfers: If you’re transferring a balance from another card with a higher interest rate, having a 0% rate can help you avoid paying interest on the transferred amount during the promotional period. The standard APR will typically apply to the remaining balance when the promotional period ends.

Here are some things to think about when it comes to intro APR offers.

Intro APR card offers can be based on a borrower’s creditworthiness. Having positive credit scores might make it easier to secure a low intro rate.

One card’s intro APR might only apply to balance transfers, not purchases. Another’s might be the opposite. Or the intro APR might apply to both. But most of the time, these introductory rates don’t apply to cash advances.

Just because you get an intro APR offer doesn’t mean there are no fees. Balance transfer fees are something to look out for if your goal is to reduce debt by transferring a credit card balance to a lower-interest card.

If you make a late payment or miss a payment altogether, you might lose your intro APR. 

In some cases, you could be charged a penalty APR after a late or missed payment. A penalty APR is typically higher than the standard APR that kicks in after the introductory period.

A grace period is a length of time when you may not be charged interest on your credit card purchases. But grace periods don’t typically apply to cash advances.

You can check your credit card’s terms and conditions to see whether your credit card has a grace period.

Make sure you know how long the introductory APR lasts. If you’re planning to pay off your entire balance before it ends, creating a budget could help you reach that goal.

Now you know the basics about how an introductory APR works. Here are a few things to consider before applying for an intro APR card.

Here are ways you might use a low introductory APR to help accomplish your financial goals.

• Pay down debt faster: You might consider a card with a low intro APR if you’re transferring a balance. That could help you save money, consolidate debt or simplify your monthly payments. When your debt accrues less interest over time, keeping up with your payments may help you pay off the debt faster. 

• Pay for large purchases over time: You might decide to open a low-interest credit card to pay for large purchases like furniture, electronics or appliances. If you’re able to pay off the entire balance before the introductory period ends, you could benefit by making a costly purchase without paying interest.

You may want to think about these possible downsides to applying for a card with an introductory APR.

• Balance transfer fees could be assessed: Moving debt from an existing card to a low-intro APR card could require a balance transfer fee. Even so, it could make sense for your situation. To help you decide, you may want to weigh the balance transfer fee against your potential savings.

• Interest can accrue once the intro period ends: At the end of the card’s specified promotional period, any remaining card balance will be subject to the card’s standard interest rate. Paying off the card’s balance in full each month could help you avoid interest. Also, creating a budget could help you see how an intro rate card and any interest charges could fit into your overall financial picture.

Want to know more about introductory rates for credit cards? These frequently asked questions might help.

A credit card with a 0% intro APR could help you save money on interest and pay down debt. But it’s important to be prepared when your promotional period ends.

If you’re interested, you could explore Capital One credit cards.

Capital One has a rewards card to fit your lifestyle, whether you’re a globe-trotting adventurer, an avid foodie or a fan of cash back on everyday purchases.

• See whether you’re pre-approved for credit cards without harming your credit scores. 

• Explore travel rewards cards with unlimited miles you can actually use. 

• Earn unlimited cash back on food and fun with a dining and entertainment rewards card.

• Earn unlimited 1.5% cash back on every purchase, every day with a cash back rewards card.