Home Business An intro APR can give you an interest-free loan—but there’s a catch

An intro APR can give you an interest-free loan—but there’s a catch

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An intro APR can give you an interest-free loan—but there’s a catch

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An introductory APR, or intro APR for short, refers to a 0% or low interest rate that a credit card company offers a new cardholder for a limited amount of time. This reduced APR may apply to purchases, balance transfers, and sometimes to both types of transactions. 

At the end of the intro APR period, the regular APR on your credit card will apply to any remaining balance on your account and to future purchases. But if you pay down as much as possible of your debt during the 0% period, you’ll save a significant amount on interest charges before it expires. 

Below are several important details you should know about credit card intro APRs. You’ll also find tips on how to use these offers if you’re considering applying for a 0% APR credit card of your own. 

How does an intro APR work? 

Annual percentage rate, or APR, refers to the interest rate a credit card company charges you to borrow money. When you open a credit card with an introductory APR, the account features a lower interest rate (often as low as 0%) for a predetermined period of time. 

It’s common for intro APR periods to last between six and 21 months. However, you should be careful to read the terms and conditions of your specific credit card agreement when you open any new account so you’ll know exactly how long your intro APR lasts. 

Some intro APRs may only apply to new purchases, some only to balance transfers, and some credit cards  offer intro APRs on both types of transactions. But even in this situation, there could be different low-interest or interest-free periods for balance transfers vs. new purchases. 
For example, the Citi Simplicity® Card features an introductory 0% APR period for 12 months on new purchases. Once the intro period ends, a 19.24%-29.99% variable APR applies. The same card comes with a 21-month 0% intro APR period on balance transfers. Afterwards, a 19.24%-29.99% variable APR will apply.  

Details to look for in an intro APR offer

Know that not all intro APR credit cards are created equal. So, if you’re considering applying for a credit card that features this type of promotional offer, there are several key details to keep in mind before you choose the card that’s right for you. 

Will you qualify?

Most credit card issuers will require an applicant to have a good credit score or better to qualify for an intro APR credit card. Therefore, it’s wise to check your credit scores and credit reports before you apply for a 0% APR credit card to see where you stand. 

If you discover credit problems or a lack of credit history, you may want to work to improve your credit before filling out a new credit card application. Additionally, if you come across mistakes on your credit report, the Fair Credit Reporting Act (FCRA) gives you the right to dispute credit errors with the appropriate credit bureaus—Equifax, TransUnion, and Experian. 

Transaction type

Depending on your situation, you may want an intro APR that applies to balance transfers, new purchases, or both. So, it’s important to make sure you apply for a credit card offer that aligns with your financial goals. 

If you’re trying to consolidate debt and save money on interest charges in the process, look for a credit card that offers a long intro APR on balance transfers. On the other hand, if you want to save money on a large purchase, you should search for a credit card that offers a lengthy intro APR on new purchases.

Length of the introductory period

No matter why you’re searching for an introductory APR, a longer interest-free (or low-interest) period might work in your favor. For example, if you’re using a 0% APR credit card to consolidate credit card debt, a card that gives you 21 months to pay down your balance would probably be preferable one that only offers you 18 months to do the same.

Therefore, it’s important to pay attention to the length of the introductory period when you shop for a new intro APR credit card. This detail can have a meaningful impact on your potential savings. 

Balance transfer fee

If you use an intro APR credit card to consolidate debt, the account will likely feature a balance transfer fee. Balance transfer fees commonly range between 3% to 5% of the amount you move to your new account. So, you’ll want to do the math and make sure consolidating your debt still saves you money overall  when you add in this extra cost. 

If you find two credit cards that feature the same introductory APR period, choosing the option with the lower balance transfer fee can  save you money. For example, if you transfer $10,000 worth of debt to an intro APR card that features a 5% balance transfer fee, it will cost you an additional $500 in transfer fees. But if you find a credit card that only charges a 3% balance transfer fee, you could transfer the same amount for only $300 in fees instead.

Keep in mind that the balance transfer fees will be added onto the balance you transfer, so if you’re approved for a balance transfer card with a $10,000 credit limit and a 5% balance fee, you can only transfer about $9,520 of debt plus the $476 balance transfer fee, making your balance on the new card $9,996.

How to use an intro APR credit card responsibly

A credit card that features an introductory APR could provide you some much-needed relief where expensive interest charges are concerned. Whether you need help paying down debt or you want a short-term financing option, a 0% APR credit card could be a useful tool. 

Yet the intro APR on any new credit card you open won’t last forever. And when the interest-free or low-interest period ends, any leftover balance will start to incur interest at the standard variable APR on the account. 

Therefore, it’s important to make a plan before you open an intro APR credit card regarding how you’ll manage the account. Below are some tips on how to use this type of credit card offer in the most responsible way possible. 

1. Create a payoff plan 

The best way to use a credit card with an intro APR offer is to create a payoff plan that helps you avoid having a leftover balance when the standard APR kicks in on your account. Here’s a simple example to demonstrate how this process works.

Imagine you transfer $5,000 to a new credit card with a 0% APR promotion. The introductory period on the card lasts for 21 months. Additionally, the card issuer charges you a 3% balance transfer fee, making your total balance $5,150. 

If you divide $5,150 by 21 months, you should pay around $246 per month to pay off your balance before the intro APR rate expires. Of course, this figure assumes that you don’t use the account for additional transactions during that period. If you did, you would need to increase your payment.

2. Schedule automatic payments 

Once you know how much you need to pay each month to reach a zero balance by the end of the promotional period, consider scheduling automatic payments for that amount with your card issuer. Automatic payments can help you stay on track with your financial goals. (You can always make extra payments along the way, if possible, to pay off your balance earlier.)

At the very least, scheduling auto pay for the minimum amount due on your credit card may help you avoid late payments on your account. If you miss a payment on a card with an intro APR offer, the card issuer could revoke your promotional rate early, and you might face other negative consequences as well. 

3. Avoid overspending 

As with any credit card, it’s important to avoid overspending when you open an account with an intro APR offer. You want to follow a budget and only spend what you can afford to pay off each month on any credit cards you use for everyday purchases. 

If you use an intro APR credit card offer to consolidate debt, you should also avoid creating new debt on your original accounts afterwards. When you use a balance transfer to pay off credit card debt and then overspend on your original credit cards again, you risk creating serious financial and credit problems in the long run. 

Bottom line

An 0% APR credit card has the potential to be a helpful financial tool when you choose your account wisely and manage the process in a responsible way. You can use this type of credit card offer to pay down high-interest debt or to finance large purchases at an affordable interest rate. 

But credit cards with introductory APR offers aren’t perfect for everyone. So take the time to make sure they make sense for you before you apply for a new account of your own. 


Please note that card details are accurate as of the publish date, but are subject to change at any time at the discretion of the issuer. Please contact the card issuer to verify rates, fees, and benefits before applying.

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