Credit Card Insights – Promotional APR Period
Taking advantage of a 0% balance transfer is one option for consolidating credit card debt. This involves moving the balance from one or more cards to a new card at an introductory interest rate.
A promotional APR period applies in which you pay a specific annual percentage rate toward the balance. Zero percent balance transfer offers can help you save money on interest while paying off debt faster.
But there are a few things to know before taking advantage of promotional rate offers.
What Is a Promotional Period?
With a credit card or an in-store financing offer, the promotional period is a set amount in which you’re able to pay off your balance without incurring interest.
The 2009 Credit Card Accountability Responsibility and Disclosure Act (CARD) requires promotional APR periods to last at least six months, though some credit cards may extend them for up to 15, 18 or even 21 months. When comparing balance transfer offers, the credit card company should spell out how long the promotional APR lasts.
What Happens When 0% APR Ends?
Introductory rates aren’t designed to last forever and your creditor should give you a specific end date for a promotional APR period. Once the promo rates end, the regular APR kicks in.
With a balance transfer credit card offer, the regular APR would apply to any remaining amounts left from the original transfer, along with any new purchases you’ve made to the card since completing the transfer. The same APR would also apply to new purchases going forward.
Deferred interest offers work a little differently and shouldn’t be confused with credit card 0% APR financing. For instance, a local furniture store may offer 0% deferred interest financing for 24 months.
In this scenario, the regular APR is applied retroactively to the entire balance if it’s not paid in full before the end of the promo period, regardless of how much you actually owe. For that reason, 0% balance transfer credit card offers can be more attractive than promotional in-store financing.
Can 0% APR Offers End Early?
While credit card promotional APR periods are designed to last a certain amount of time, it’s possible that your 0% APR deal could be cut short. This can happen if you violate your card’s terms and conditions in any way.
For example, missing a payment or paying late could cause the credit card company to apply the regular APR to balances starting with the next business cycle. Or you may be subject to a higher penalty APR.
Paying late can wipe out any money-saving benefits associated with transferring a balance at 0%. And if a late payment is reported to the credit bureaus it can also cost you credit score points.
Can You Extend a 0% APR Promotional Period?
Ideally, if you’re transferring a credit card balance to a new card at 0% then you’re choosing one with a long enough promotional period to allow you to pay the balance off. But if for some reason you still owe a balance when the promotional rate is approaching its expiration date, you may be able to get a little more time to pay.
You’d have to call your credit card company and ask for a 0% APR extension. They aren’t required to offer you one but they may be persuaded to do so if you’ve been a good customer in the past. Be prepared to make a case for why your 0% APR should be extended beyond the promotion end date.
If the credit card company refuses to budge, you could transfer any remaining balance to a new card at 0%. This way, your savings on interest continues. But keep in mind that you’ll pay another balance transfer fee and the inquiry for a new card will show up on your credit history.
If you’re hitting a dead end when searching for balance transfer offers, you might consider a low interest rate personal loan instead. While personal loans do charge some interest, rather than offering a 0% APR, it’s possible that you could snag a low rate if you have a solid credit score and income.
What to Know Before Signing Up for Promotional APR Offers
Getting a promotional rate may sound tempting but before applying for credit, ask yourself these questions:
- Is this a 0% APR offer or deferred interest financing?
- How long does the promotional period last?
- What will the new APR be once the promo period ends?
- If there’s a balance remaining when the promotional period ends, how is interest applied?
Also, consider how you’ll pay promotional APR offers off to avoid interest charges. Estimate the monthly payments you’ll need to make, then compare that to your budget to make sure it’s doable. Always pay on time and avoid making new purchases with the card so your balance continues to go down, rather than up.
What to know about paying off debt and getting your finances back on track
Rebecca Lake is a freelance writer specializing in personal finance,
credit and debt. She’s a contributor to U.S. News and World Report,
Forbes Advisor and The Balance and her work has appeared online at CreditCards.com,
Money-Rates.com and dozens of other top publications.