Introductory rate: What it is and how it works

A lower introductory interest rate on a credit card can be tempting. But like any important financial decision, it’s a good idea to get the facts about an introductory annual percentage rate (APR) deal so you know exactly what it could mean for you.

Here are some things to know about how introductory APRs and other promotional rates work—and how you might be able to use one to help meet your financial goals.

What you’ll learn:

• A credit card’s introductory rate, or intro APR, is a special interest rate that’s typically set for new purchases or balance transfers. 

• An intro APR lasts for a limited period of time, often between 12 and 21 months, depending on the credit card issuer.

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

• There might be certain fees and restrictions associated with intro rate credit cards, so it’s helpful to read the fine print to understand all the card’s terms. 

• 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 lower-than-usual APR that you get for a set period of time when you open a new account. An intro APR may apply to a card’s purchases, balance transfers or both.

An intro APR doesn’t last forever—it’s a limited-time offer. When the introductory period is over, the standard APR will go into effect. If you’re carrying a balance on the card when the intro APR period expires, you could see the card’s standard rate applied to the outstanding balance.

By federal law, intro APR periods must last for at least six 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. 

One important thing to note: 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. In other words, you won’t have to pay interest on things like qualifying purchases, balance transfers or both.

• 0% introductory APR on purchases: Any new credit card purchases you make with an introductory rate will be charged 0% interest until the promotional period ends. Then 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 credit card with a higher interest rate, you’ll avoid paying interest on the amount transferred throughout the promotional period. Just like with an introductory rate for purchases, the new APR will be due on the remaining balance when the promotional period ends.

Keep in mind that intro APRs aren’t always 0%. You might think of 0% when you hear “intro APR,” but actual rates can vary.

When comparing credit card offers, it’s helpful to understand the difference between 0% intro APR and deferred interest. A 0% interest offer means interest isn’t charged during the promotional, interest-free period. But once the promotional period ends, the standard rate will apply to new purchases or begin to accrue on any remaining balances.

On the other hand, deferred interest delays charging the standard interest rate until the end of the introductory period. This means if there’s any remaining balance, you’ll be responsible for paying back all interest costs that were accrued from when the account opened. Deferred interest is commonly found with store credit cards.

Cards with intro APRs might have restrictions and fees you should know about before applying. Getting all the facts about the introductory offer can help you find a card that’s right for you. 

Here are some things to consider when it comes to intro APR offers:

Intro APR card offers can be based on a borrower’s creditworthiness. So the promotional rates are often geared toward those with good credit scores or excellent credit scores.

It’s a good idea to understand what the intro APR applies to. One card’s intro APR might only apply to balance transfers, not purchases. Another 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 there’s an intro APR offer doesn’t mean there are no fees. For example, some cards might charge a balance transfer fee. So if your goal is to pay down your debt by transferring another credit card’s balance to a lower-interest card, make sure you take the fees into account.

There might also be fees and penalties for things like late payments.

If you make a late payment or miss a payment altogether, you might lose your intro APR. In some cases, your card might charge a penalty APR after a late or missed payment. 

A penalty APR is likely much higher than the standard APR that kicks in after the introductory period.

Credit cards, regardless of whether they offer an intro APR, often come with a grace period. A grace period is a designated length of time when you may not be charged interest on your credit card purchases. 

If your card has a grace period, different factors might impact how the grace period applies to a purchase—like whether you’ve paid your previous balance in full by the due date each and every month.

You can check your credit card’s terms and conditions to see whether your credit card has a grace period. And keep in mind that most credit cards don’t provide a grace period on cash advances or balance transfers.

Make sure you know how long the introductory APR lasts. If your goal is to pay off your entire balance before it ends, it could be a good idea to make a budget.

Now you know the basics about how an introductory APR works. But why does it matter? And how can it help you accomplish your financial goals? 

Here are two ways you might use a low introductory APR:

You might consider a card with a low intro APR if you’re transferring a balance from another card to save money on interest. Balance transfers can also help you consolidate credit card debt and simplify your monthly payments.

Balance transfers are pretty simple: You move your debt from one credit card to another with a lower interest rate. When your debt is accruing less interest over time, keeping up with your payments may result in the debt being paid off faster.

But keep in mind that you generally can’t transfer balances between cards from the same issuer. And balance transfers might have fees attached. So you might want to find out if you’ll be charged—and how much—before you make your decision.

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 shouldn’t have to worry about paying the standard interest rate on purchases made within the introductory period.

Still curious about introductory rates for credit cards? These frequently asked questions might help.

A credit card with 0% intro APR could help you save money on interest and pay down debt. And if you’re using it responsibly, that could also lead to improved credit scores. But it’s important to be prepared for when your promotional period ends.

You can explore Capital One’s low APR introductory rate credit cards to learn more about what they have to offer. Or see if you’re pre-approved for a Capital One credit card.