The Ultimate Guide to Credit Cards
Friday, July 19, 2024

What is a Credit Card Promotional Period? How to Manage and Maximize Introductory Offers

What Is A Promotional Period
Eric Bank

Written by: Eric Bank

Eric Bank
Eric Bank

Eric Bank is an M.B.A. who has covered financial and business topics since 1985, appearing regularly on Credible, eHow, WiseBread, The Nest, Zacks, Chron, BadCredit.org and dozens of other outlets. Eric specializes in taking complex subject matters and explaining them in simple terms for consumer audiences, particularly in the world of personal finance. Eric holds a Master's in Business Administration from New York University and a Master's in Finance from DePaul University.

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Edited by: Jon McDonald

Jon McDonald
Jon McDonald

Jon leverages 15-plus years of journalism expertise to inform financial consumers about emerging trends and companies making an impact in the industry. He is most knowledgeable in the areas of budgeting, credit card rewards, and responsible credit use. Jon has a passion for writing and editing, and his articles have appeared in publications produced by The New York Times.

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Reviewed by: Ashley Fricker

Ashley Fricker
Ashley Fricker

Ashley Fricker has more than a decade of experience as a finance contributor and editor, and has specialized in the credit card industry since 2015. Her credit card commentary is featured on national media outlets that include CNBC, MarketWatch, Investopedia, and Reader's Digest, among many others. She has worked closely with the world’s largest banks and financial institutions, up-and-coming fintech companies, and press and news outlets to curate comprehensive content and media. Ashley holds a bachelor's degree in multimedia journalism from Florida Atlantic University.

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Opinions expressed here are ours alone, and are not provided, endorsed, or approved by any issuer. Our articles follow strict editorial guidelines and are updated regularly.

My heart wanted this nifty new camera with a retro design, but my budget was implacably opposed. My solution was to obtain a new credit card with an introductory 0% APR for 15 months. What once seemed impossible now became easy-peasy. Say, “Cheese!”

The credit card promotional period is when, under special terms, the interest rates of credit cards are much lower or even zero. They can apply to new purchases, balance transfers, or both. You can use the promotion period to pay for things without much (or any) interest.

Spacing out payments makes expensive items affordable, which benefits your lifestyle because you don’t have to save up in advance to purchase big-ticket items.

How Promotional Periods Work

Credit card issuers love to acquire customers. They make it look like they offer the best deal on their credit cards through signup bonuses and low-interest promotional periods. You will be eligible for low- or no-interest offers during the period. Issuers do this to tempt customers to sign up and use their products.

Typical Duration

Credit card promotions typically run for periods of six to 18 months, though sometimes up to 21 or 24 months. Throughout that period, you will benefit from the reduced APR on eligible transactions. When the promotional period expires, the regular terms and conditions for the credit card go into effect, so it is wise for you to pay off your balances before the promotion expires.

Eligibility and Limits

Most of the time, card issuers impose conditions, such as having a good credit score or a solid income level, to determine who can receive an offer.

Promotional period fundamentals

This kind of offer also comes with limits. It starts with your credit line, which defines the maximum amount the promotion will cover. Only items defined as “eligible” qualify for a purchase promotion. This eliminates cash-like items such as cash advances and money orders. It may also exclude specific spending, such as gambling and pornography.

By law, all card issuers who offer an introductory APR rate must allow at least six months of low-interest financing. During this period, you still have to pay the card’s annual fee or other recurring charges.

Deadlines may apply to balance transfer promotions that require you to complete your transfers within a short period to qualify.

Common Types of Promotional Periods

In one way or another, promotional periods involve interest rates or rewards. For purchases and balance transfers, a 0% or reduced APR applies for the length of the promotion. Reward promotions provide higher reward rates for a specified period. These include special promotions associated with a single merchant and rotating bonus rate rewards. Let’s take a deeper dive into these different types of promotions.

Interest Rate Promotions for Purchases

To understand the value of interest rate promotion for purchases, it helps to know how and when credit cards usually charge interest. This involves an interval known as a grace period.

Credit Card Grace Periods

In virtually all cases, credit cards allow a grace period, during which no interest will be accrued. Cards with grace periods must provide at least 21 days from when your statement closes until you must pay without incurring finance charges. You won’t accrue any interest if you pay the entire balance before your bill is due.

When you don’t pay in full or if you carry over a bill from a previous cycle, interest accrues on the residual balance. Interest continues to accrue until you pay down your balance — unless this is mitigated by a 0% APR offer on purchases.

0% APR Promotions on Purchases

With a 0% APR promotion, you’re interest-free on new purchases even if you carry outstanding balances and go past the grace period. Yes, you must make monthly payments and eventually pay off that debt. Still, interest won’t mount at any time throughout this promotional period unless you break the rules.

Interest rate promotions

The promotion period, during which APR is as low as 0%, differs a bit across cards but generally extends between six months and 18 months. Even within this framework, you may be required to pay annual fees, foreign transaction fees, and other charges. Federal law requires that any card offering a promotional APR must provide at least six months of low-interest financing.

You must make your monthly payments during the promotional period. At the same time, new eligible purchases will not accrue any interest. It is wise to make more than minimum contributions to reduce your debt faster.

You should also know your regular APR, which will begin when the introductory offer is over. This APR will apply to any remaining balance after the promotion has expired and to any unpaid new balances you charge in the future.

Example Purchase Promotion

In this example, imagine you have a $5,000 balance due to eligible purchases. The first thing you do is place the card in the sock drawer until you pay off the balance. The following chart shows the costs of repaying the card over 18 months with a 21% APR.

MonthRemaining BalanceTotal InterestMonthRemaining BalanceTotal Interest
1$4,761.28$87.5010$2,415.71$677.96
2$4,518.37$170.8211$2,131.76$720.23
3$4,271.22$249.8912$1,842.84$757.54
4$4,019.74$324.6413$1,548.87$789.79
5$3,763.86$394.9914$1,249.75$816.89
6$3,503.51$460.8515$945.39$838.76
7$3,238.59$522.1616$635.71$855.31
8$2,969.04$578.8417$320.61$866.43
9$2,694.78$630.8018$0.00$872.04

If your card had an 18-month 0% APR promotion on purchases, you would save almost $900 in interest. However, if you don’t totally repay the card within the 18-month promotion, you will be charged interest on any remaining balance.

Rules to Remember

Some cards offer reduced APR promotions instead of 0% on purchases. While you will pay some interest by stretching out your payments, the cost will be well below what you’d pay if the regular APR applied.

The card never sends another introductory APR offer because these are designated for new customers only. It may not even offer a promotion period if you are applying for a new card from that same company. Policies about this differ across issuers, so check with the bank before applying.

Balance Transfers

A balance transfer is akin to a fund transfer from your savings account to your checking account — just that this transfer goes from one company to another. Balance transfer promotions save you interest during the specified period.

Anatomy of a Balance Transfer

When you owe an outstanding balance to one credit card and if the interest rate is higher than your new card, you will benefit by transferring that balance to the new card and paying less money to satisfy the debt.

If you make such a transfer, the new card issuer directly sends the money to your existing card issuer to pay the debt. Thus, you owe that amount to the new card.

You may initiate a balance transfer request through your bank’s website. The overall process may take two to four weeks to complete. For the most part, a small fee of around 3% to 5% of the amount transferred is charged on a balance transfer.

Make any payments owed to your old credit card company during this transition time. Please do so to avoid late payment fees and damage to your credit history. If you accidentally double-pay, you can receive a refund for the overage after completing the balance transfer.

Once your old card has a $0 balance, you can choose to close the account or leave it open. But remember, closing your old account can hurt your credit utilization ratio — and, ultimately, your credit score.

Balance transfer promotions

Balance Transfer Cards

A balance transfer credit card is a regular credit card with an introductory promotion for you, a new cardholder, to help you pay down the credit card debt you’ve already accumulated.

As such, you can use a balance transfer card like any other to purchase goods and services in stores and online, pay bills, pay for services offered, rent a hotel room or a car, or any other credit-based transactions. Rewards for qualifying purchases or any other perks make your card more attractive.

As a flagship feature, a balance transfer card will have a 0% (or reduced interest rate) balance transfer promotion. Throughout a set period, you can take an existing credit card balance, transfer that balance to the new card, and pay no interest on that debt for the length of the promotion. Many balance transfer cards apply the promotion only to transfers you complete in the first 45 or 60 days after account opening.

How long the interest-free period applies to your balance transfer deal is often down to the individual card. It could be as short as the legal minimum of six months or last for 18 months or more.

During that period, the issuer will charge no interest on the debts you moved to the new card. You will incur a balance transfer fee equal to a certain percentage, typically between 3% and 5%, of the debt you’re transferring. 

While this is expensive for a single fee, it will still total much less compared to the interest you would pay while paying down the debt. The regular purchase APR applies to all the remaining unpaid debt after the end of the promotional period.

Example Balance Transfer Promotion

Suppose you have a balance of $10,000 on a credit card with an APR of 20%. If you made monthly payments of about $900, you would pay off that balance in a year. If, instead, your APR were 0% for the year, you would save up to $2,000 in interest.

Amount Transferred
to New Card
Cost of 3%
Balance Transfer Fee
Estimated Interest
Saved Over 12 Months
$1,000$30$200
$2,500$75$500
$5,000$150$1,000
$7,500$225$1,500
$10,000$300$2,000

Of course, you’ll have to pay the balance transfer transaction fee. In this example, a 3% fee will cost you $300.

Watch Out for Gotchas

There are a couple of catches, however. First, you need to have a pretty good credit rating to get a 0% intro APR balance transfer credit card. 

If you make a late payment, the issuer will likely terminate the promotion, and your early interest rate will spiral upward. It may revert to the regular APR or rise to the penalty level, typically 29.99%. 

All transferred debt you still need to repay by the end of the promotional period will accrue interest at the regular APR, which might be higher than that of the original credit card. The cardholder agreement you receive upon application contains rules on the card’s balance transfer promotion.

Finally, some balance transfer cards only apply the reduced APR to transfers you complete within a relatively short period, such as 45 days from account opening. Any transfers after the deadline are not part of the promotion.

Reward Promotions

Credit card reward promotions are the benefits you earn when purchasing certain items. These include beefed-up rewards for spending with a particular merchant. 

For example, some credit cards offer bonus points or cash back when the card is used to pay for, say, Uber rides. The rates can be multiples of the usual earning rate, making it attractive for heavy users who share rides. This offer comes with an expiration date that defines the promotional period.

Reward promotions graphic

Some credit cards have quarterly rotating reward schemes. This means that there will be changes to the categories every three months that will earn you higher rewards. For instance, during one quarter, a card may offer 5% cash back for grocery shopping, while during the next quarter, it can earn you a 5% return on buying gas. 

You must remember to enroll in the new categories each quarter to get your bonus rewards. These promotions induce you to use the credit card more often and for more specific purchases. Be aware of caps on the amount you can earn in any three-month promotional period.

You must stay informed of the promotions and rotating categories to get the most from credit cards. Then, take full advantage of the offers to get maximum points or cash back.

Benefits and Drawbacks of Promotional Periods

The benefits of low-interest promotions outweigh the drawbacks, but only if you pay off your balances before the promotional periods end. Make sure to make the required minimum payments, as the issuer may revoke promotions that are currently underway if you’re tardy.

Benefits

  • Possible Lower Interest Rates: Some credit cards offer a lower interest rate for an agreed period. This enables you to save some money. Just ensure you make your payments before the closing date of that introductory period to avoid high rates.
  • Earning Additional Rewards: Some credit cards give you bonuses on your rewards for a specific period. In other words, additional points or cash back are offered for what you will spend money on. This can help you get a higher value from the card.
  • Transferring High-Interest Balances: Transfer your high card interest-rate obligations to a card with a lower or zero interest rate. Do so with the expectation that it will allow you to pay much more aggressively.

Drawbacks

  • Reverting Interest Rates: After the promotional period, interest reverts to the regular rate. You end up paying interest if you have a balance remaining.
  • Balance Transfer Fees and Charges: Cards have charges for the balance transfers. The fee amounts to a certain percentage (e.g., 3% to 5%) of the balance to be transferred. Consider calculating whether the transfer is worth making.
  • Accumulating More Debt: Lower rates can easily prompt you to overspend and thus borrow more. Be sure to budget your money.

When used responsibly, low-interest promotions can save new cardmembers a considerable sum. You may keep or cancel the credit card once the promotional period ends.

How to Maximize Promotional Periods

You can save money through promotions. Such offers come with low or no interest rates for a given period. If you seek maximum benefit from such an offer, you need to plan out purchases and transfers adequately.

Plan Purchases and Transfers

First, calculate the repayment duration. This helps you know how much you owe and when to pay while avoiding high interest rates at the expiration of the promo period.

Budget large purchases during promotional times. Spread payments without paying an extra charge in interest. As programmed, these steps help to protect your savings and take full advantage of these promotional offers.

Manage Payments and Expiration Dates

When using a credit card, be aware of promotional period end dates. Forgetting the end date can result in surprise charges and higher interest rates. To remind yourself of these, put dates in your calendar or a note-taking app.

Even better, set up automatic payments on your credit card apps. Most banks and financial applications allow you to set alerts and payments on due dates. They also should warn you of approaching end dates for promotional offers.

Maximizing promotional benefits graphic

You will receive notifications on your phone or mail, updating you regarding your payments. This can help you avoid late fees and penalty interest rates that interfere with your good financial record.

Understand the Fine Print

It would help if you read every section of your credit card agreement. Start with the sections that concern interest rates, fees, and penalties associated with the card. This information will give you an idea of what it will cost to use the card.

Consider the interest rates over time because they will rise after the introductory rates expire. Understand the special offers or rewards programs available with the card, how they will be executed, what the rules are, and how they benefit you. This can assist in avoiding surprise charges and applying for the credit card that best fits your requirements.

If you find any of the terms and conditions vague, do not hesitate to call the issuer for further explanation. Feel free to inquire and clarify all doubts before getting the card.

Clarifications will prevent you from stumbling into the pitfalls you should avoid. Call and inquire about what you need to know; ask those questions until the answers are clear. Knowing what a credit card agreement means will give you the power to understand your responsibilities and the rights you enjoy.

Make the Most of Your Credit Card’s Promotional Period

You’ll benefit from lower interest rates and/or cash back rewards during promotion periods. Afterward, try to pay off your balances so high-interest charges do not take effect following the end of the promotional period.

It may help to limit yourself to necessary purchases if you’re on a tight budget. Remember to read the terms of your credit card agreement carefully. Keep track of when the promotional period is about to end and what the new interest rates will be.

Stay on top of bill payments so you always pay on time. This will avoid late fees and the loss of your promotions. Using your credit card responsibly and having a good credit profile will also ensure access to more promotions in the future.