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What Is an Introductory Rate?

An introductory rate is the promotional rate that credit card companies offer their customers. The rate refers to the interest or annual percentage rate (APR). What credit card companies do is to lower their regular APR in an effort to entice new customers to avail of their products.

Credit cards are notorious for charging extremely high interest rates, especially if you are unable to pay the full amount that is due for a billing period. As a result of these high interest rates, it is not uncommon to see a person with a huge amount of credit card debt. What credit card companies do then is to offer promos wherein people with existing credit card debt with another company can transfer their balance for, say, 0 percent interest. This is an example of an introductory rate. Obviously, the credit card company offering the introductory rate is aiming to get individuals to choose their services over the services of their rivals.

What is important to know is that introductory rates are simply that - introductory. This means that the 0 percent interest rate is only going to be valid for a specific number of months. This period will vary from one credit card company to another. The introductory period can be anywhere from a month to six months, and in some cases, even reach a year. Once the introductory period is over, the regular APR will be applied to the existing balance.

While introductory rates can be very attractive, it is vital that you read the fine print so that you will not end up having to pay more once the introductory period is over.

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