What kinds of credit card APR are there?
Credit cards can have multiple APRs depending on how you use them. That means it’s possible to have different interest rates on the same card. Some common APRs you might encounter include:
Purchase APR
Your purchase APR is the interest rate for new purchases made on the card. A low or 0% APR on new purchases can be a common promotional offer for new cards. You generally have a grace period between the end of your monthly statement cycle and when interest begins to accrue. If you pay off your balance in full before the due date, you typically don’t owe interest on your purchases.
Balance transfer APR
Some credit cards allow you to transfer debt from other lenders, so you now have one monthly payment rather than multiple. The interest you pay on balance transfers is calculated using your card’s balance transfer APR. Some balance transfer cards offer low or 0% APR for a certain period, meaning you can pay down your debt without adding interest. Balance transfers often come with additional fees, typically a flat fee or a percentage, whichever is greater.
Cash advance APR
Your credit card may allow you to withdraw cash like a debit card. However, these cash advances often feature a significantly higher APR from regular purchases, and interest generally begins to accrue right away. Cash advances are not covered under a typical introductory APR offer.
Penalty APR
Card issuers may charge a penalty APR when you miss a payment, exceed your credit limit or violate other terms of your agreement. An introductory APR doesn’t protect you against a penalty APR, and you may lose the intro rate if you don’t keep up with your monthly payments.
How long does the 0% intro period last?
The length of the 0% APR promotional period can vary depending on the issuer, card and type of APR (balance transfer or purchase). Lenders are required by law to offer a minimum of 6 months, but you may find intro periods lasting between 12 and 21 months. If you have questions about your specific intro period, check your card’s terms or speak with your lender.
Benefits of 0% intro APR
A 0% intro APR offer can have numerous benefits, including:
- Increased flexibility: A 0% APR card may help you pay off larger purchases like home improvements or emergency expenses without worrying about interest
- Faster debt payoff: If you transfer an existing debt to a card with a 0% APR offer, it may help you pay off that balance sooner than you would if you were still accruing interest every month
- Perks and rewards: Some 0% APR offers also come with generous rewards for purchases within the promotional period, allowing you to maximize your spending
Drawbacks of 0% intro APR
There are many important considerations to be aware of when deciding to pursue a 0% APR credit card, like:
- Effect on creditworthiness: Applying for a new credit card requires a hard credit check, which can negatively affect your credit profile. Also, any balance on your card will still affect your credit utilization ratio, one of the major factors that determines your creditworthiness.
- Potential interest charges when promotional period ends: It’s important to stay on top of when your promotional period is over. If you have a balance when your standard APR kicks in, you may find yourself with interest payments you weren’t expecting.
- Consequences for missed payments: If you miss a payment or pay less than the minimum monthly payment, your lender may cancel your 0% APR offer, in addition to applying a penalty APR.
How do I qualify for a 0% intro APR offer?
Qualifying for a 0% intro APR offer often requires strong credit and a history of on-time payments. Depending on your creditworthiness, you may be able to pre-qualify for offers, allowing you to see terms and rates without affecting your credit.
Understand how an 0% APR card affects you
A 0% intro APR credit card may provide ease of mind when making large purchases or consolidating your debt. Be sure to keep track of how long your promotional period lasts to make the most of your interest-free payments. Remember, you only get charged interest on the balance remaining on the card, so keeping it low can help you start on the right foot when your standard APR applies.
Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.
