What is an intro APR on a credit card? Let’s go with Hanfincal to figure out the APR introductory period meaning and how it works.
1. What is Intro APR?
An intro APR is a promotional interest rate offered by credit card companies to new customers for months after opening an account.
Some people mistake an intro APR with a regular APR. So, what is the difference between intro APR and regular APR? Regular APR (regular annual percentage rate) refers to the yearly interest generated by a sum charged to borrowers or paid to investors.
An intro APR is offered on balance transfers or purchases or both on some credit cards. Usually, this rate is lower than the standard APR, typically as low as 0%. An introductory 0% APR deal lasts 10.5 months for purchases and 12 months for balance transfers. Some credit cards will offer a 0% APR for up to 21 months.
It’s important to remember that introductory APRs aren’t always 0%. In fact, introductory APRs can vary.
2. How does the introductory APR work?
When a credit card has a 0% introductory APR, you will not be charged interest on purchases, balance transfers, or both. During this time, you must still make at least the minimum payment each billing cycle, but you will not incur any interest charges.
Following the end of the introductory period, new purchases and any remaining balance will be subject to the regular APR. The issuer may cancel the promotion rate if you pay late or don’t make at least the minimum payment during the introductory period.
The two most common 0% APR offers for new purchases, and balance transfers are new purchases and balance transfers. Credit cards frequently provide both to new cardholders.
How does the introductory APR work?
3. What is the difference between 0% intro APR and deferred interest?
If you have a credit card with a 0% APR, you can carry a balance every month during the interest period and not be charged a penny as long as you make the minimum payments on time.
On the other hand, a deferred-interest card still calculates interest every day you have a balance – you don’t need to pay it right away. You’re safe if you pay off the entire balance before the deferred interest period expires. However, if there is any remaining balance, you will be retroactively charged all interest accrued during the deferred period. It will threaten your financial health.
4. Benefits of introductory APR
An introductory APR has 4 benefits that are listed below:
4.1. Pay down debt faster
An introductory APR can help you pay off your debt faster by transferring or consolidating it. You move your debt from a higher-interest-rate credit card to a lower-interest-rate credit card. When the interest on your debt is lower, your payments may result in the debt being paid off sooner.
Balance transfers typically incur a fee of 3% to 5% of the transferred amount. If you’re transferring high-interest debt from one card to another with a 0% APR, the fee is usually well worth it.
Benefits of introductory APR
4.2. Pay for large purchases over time
You can save a huge amount of money when using a credit card with an intro APR to pay for large purchases of furniture, electronics, appliances, and so on. Plus, if you have a large enough budget, you might even be able to pay off the total balance before the intro period ends. You won’t have to pay the standard interest rate on your loan.
4.3. Savings
The most obvious advantage of the introductory APR is that it saves you money on interest on purchases that you would otherwise have to pay. You do not have to pay any additional interest during the promotional period, especially if you have a card with an intro APR of 0%. Furthermore, super-low APR balance transfer deals can be used to implement debt-reduction strategies.
4.4. Get cash back and rewards
Cash back or rewards are bonuses that supplement the appealing features of the APR intro period. Some issuers will give you money back if you spend a certain amount of money within a few months of opening an account. Other credit cards provide sign-up incentives in the form of points or miles.
As a result, you will not only be able to use these cards for balance transfers or purchases that can be paid off over time with no interest added, but you will also profit from the process.
5. What to consider before accepting a 0% intro APR offer?
Before accepting a 0% intro APR offer, there are 8 factors you should consider:
- Qualifications: An introductory APR on one card may only apply to balance transfers and not purchases. Alternatively, the introductory APR may apply to both. These introductory rates do not always apply to cash advances.
- Credit score: Great deals necessitate good to excellent credit scores, typically ranging from 670 to 850.
- Fees: Look beyond the short-term interest rate advantage, as additional fees may be imposed.
- Grace intervals: A grace period is when you will not be charged interest on credit card purchases. Make sure you understand these factors to avoid being charged interest.
- Credit card type: The credit card you choose should be suitable for the introductory rate offer and your long-term needs and lifestyle.
- Penalty APR: If you are late payment or do not make a payment at all, you may lose your introductory APR.
- Introductory Period: Make sure you understand how long the introductory APR will last. It can assist you in managing your financial ability to pay off your debt.
- Regular APR: Keep in mind that the credit card’s introductory interest rate will eventually rise to its standard rate.
What is an intro APR on a credit card? You’re probably already familiar with those definitions, right? Perhaps the next time you see a zero—or another lower-than-usual number—on an introductory APR, you’ll better understand how it works. Hanfincal assists you in better understanding and managing your finances.
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