What is an Introductory Offer? Why Credit Card Issuers Offer Consumers Incentives to Apply

With two very good credit cards in my wallet, I didn’t feel a need for a third until a natural disaster struck the area where I live. After a mandatory evacuation followed by an extended hotel stay while some damage to my home was repaired, I decided to take advantage of an offer to get a new card with bonus points toward hotel stays. 

A friend in the travel business told me I could collect the introductory bonus offer and then add the points from my hotel stay, paid for by my insurer, to my card account. In the years since then, I’ve used tens of thousands of points toward hotel stays, and I still have 130,000 points banked toward future stays or other rewards.

Credit card introductory offers are one-time, or limited-time, bonus offers of rewards, benefits, or special APRs that are meant to attract new cardholders.

And these credit card introductory offers aren’t just for hotels. New cards may come with cash back awards, shopping points, airline miles, a 0% annual percentage rate (APR) for new purchases, balance transfers, or both, or other rewards or benefits. 

To activate the offers, you just need to apply for the card, be approved, and meet any other requirements. There’s plenty you need to know about introductory offers, but I’m here to ensure you have all the information before you apply.

Most card introductory offers have simple rules, but you should still read the entire offer to understand how it works and what to expect when you apply for your new card.

Most have timelines for meeting spending goals, or an end date for an intro APR, so those are important to remember.

Common Types of Introductory Offers

There are two main types of card introductory offers:

Bonus rewards offers give you shopping points, airline miles, hotel stay points, other travel rewards, or cash back when you get a new card and meet certain requirements — typically spending. This type of offer is sometimes called a signup bonus, welcome offer, or new cardholder offer.

0% APR offers give you an interest-free period for new purchases, balance transfers, or both, when you get a new card and meet the offer requirements. The 0% APR may help you afford a large purchase or pay off card debt while you take a break from interest charges.

To collect a bonus rewards offer, you’ll typically have to use your new card for a minimum dollar amount of purchases within a set time frame. Just note that balance transfers, cash advances, wire transfers, or purchases of gift cards, money orders, or other cash equivalents usually don’t count toward the minimum spending threshold. The time frame usually starts when your card is approved.

Typically, the more valuable the bonus rewards are, the more you’ll be required to spend, but these offers may allow a longer time frame. For example, a minimum spend of, say, $500 or $1,000 within three months might earn you a modest cash back bonus.

In contrast, a spend of thousands of dollars within five or six months might be required to earn hundreds of dollars in travel benefits. 

Note that partial bonuses typically aren’t awarded. If your spending falls short of the minimum required at the end of the offer period, the bonus opportunity will simply expire.

With card interest rates in the high teens or mid-to-high 20s, a 0% APR offer may give credit card customers who carry a balance some welcome relief. Interest-free purchase offers typically start when you first use your new card. 

Interest-free balance transfer periods typically start when the card is issued, so be sure to check how long you have left once your transferred balance is received on your new card account. With either type, the 0% APR period will have an end date, after which the regular APR, which is the APR the card will have moving forward, will be applied to any unpaid balance or additional purchases.

How Long Introductory Offers Last

Bonus rewards offers typically allow three to six months to meet the minimum spending requirement. 

0% APR offers typically last six to 18 months. Regardless of the time frame, the card’s full APR will apply when the 0% APR period ends.

Cards that offer the longest 0% APR offer periods may not have the most generous rewards program. In a way, the break on interest charges is usually the reward with these cards.

Typical Eligibility Requirements

Card introductory offers are meant to attract new customers, sometimes those with good or excellent credit, who may continue to use the card after the offer ends. This allows the card issuer to continue the relationship and possibly recoup the cost of the offer through interest charges and fees. 

You can avoid these expenses by choosing cards that don’t have annual fees and paying your card balance in full every month — and you’ll still get to keep the bonus rewards if you take advantage of that type of offer.

Introductory offers aren’t meant for people who apply for multiple cards just to collect the bonuses and then abandon the cards for newer, shinier ones with more introductory offers. 

That doesn’t mean you can’t churn through a lot of bonus cards over time; however, this behavior could be risky because you could end up with more cards than you can manage and the process of canceling those you don’t want to keep could prove challenging.

To discourage customers from this behavior, card companies today typically limit their introductory offers to first-time customers or people who haven’t had that type of card for a while. Offers may also be limited to people who have good or excellent credit scores.

Introductory offers come with benefits and potential drawbacks. You should be aware of both before you apply.

Benefits

The benefits of introductory offers vary, depending on the type of card and offer. Examples may include interest savings, bonus rewards, and greater flexibility in how you use your cards.

• Interest savings: If you never carry a balance, you won’t get a benefit from a 0% APR. If you do carry a balance, you might save money by getting a card with this type of offer and using the opportunity to pay off debt or make a large purchase with a period of interest-free payments.
• Maximizing rewards: If you’re one of the many people who struggle to save for a big purchase or travel expense, or you’d simply like a little extra cash to boost your options, a card with an introductory bonus rewards offer may give you what you want. In a hurry? Look for an offer with a shorter offer time frame so you can collect your bonus rewards sooner.
• Financial flexibility: While you should never apply for more cards than you can manage, selectively taking advantage of introductory offers could enable you to pocket cash back, save money on travel or shopping, or take a break from interest expenses on part or all of your card debt.

Individually, introductory offers are valuable. Together, they’re powerful because you can shop around and apply for those benefits that offer the most for you. With a good mix, you can maximize your rewards and lower your interest expenses.

Drawbacks

• End of promotional period: Introductory offers come with a start date and an end date. Be sure to mark your calendar for the latter so you can meet the spending requirement for your rewards, or be prepared for the sharp rise in your APR before that date arrives. Ideally, you’ll have paid off any balances you transferred before the full APR is applied at the end of a 0% APR intro offer.
• Spending traps: Introductory offers can be alluring. Who wouldn’t want extra cash, free travel, or a vacation from card interest charges? Still, there is a caveat: a bonus reward or 0% APR can become an inducement for you to spend more than you should. If you know that might happen to you, an introductory offer may not be a smart move.
• Balance transfer fees: Most 0% balance transfer offers involve fees that you’ll have to pay as soon as you transfer your card balances. A typical fee structure is 3% of a balance transferred within the first 60 days and 4% of the balance transferred after that. The short time frame for the fee discount is intended to encourage you to transfer your balance as soon as your new card is approved.

Paying a fee to avoid paying interest may seem counterintuitive, but you may still have a big opportunity for long-term savings with a balance transfer, even if a fee is charged. How much will depend on the amount transferred, the APR you’re currently paying, the duration of the 0% offer, and whether you use the opportunity to pay off debt.

With so many types of introductory offers out there, you don’t need to pick the first one you see. You should take your time to find one that matches your needs, habits, and goals. 

Because an offer of 1 million bonus air miles isn’t going to be beneficial if you aren’t that into traveling.

Consider Your Financial Goals

To choose a good introductory offer, consider your financial situation and your goals for your new card. 

Ask yourself these questions:

• Do I want extra cash? 
• Do I need travel benefits? 
• Can I benefit most from a 0% APR? 

You’re unlikely to find an offer that gives you multiple choices, so pick one and make that your priority.

Next, look for a card that will meet your needs during the offer period and after the offer ends. Your new card should look like it will be good for you now and later, not just right now.

If bonus rewards are your priority, think also about the types of rewards you’ll actually use. Are you planning to travel? Or would you be better off with cash back?

If you’re shopping for a new card and you’re not sure what type of introductory offer you want, consider getting a cash back card with no annual fee. That’s an easy win-win: more cash at no additional cost.

Pay attention to the card’s annual fee as well. Many cards don’t charge one. Others waive the fee for the first year; after that, you’ll have to pay it if you keep the card. 

Years ago, I canceled a very nice travel card because my personal level of engagement with that card didn’t generate enough benefits to offset the annual fee.  The fee wasn’t high, but I had to pay whether I used the benefits or not.

Compare Offers and Terms

Before you apply for a new card, you should compare the terms and conditions for the introductory offer and the card itself. If you’re eyeing a bonus rewards offer, do you feel comfortable with the minimum spend and the time you have to make the purchases?

If you’re looking for a 0% APR offer, will you use it for purchases, a balance transfer, or both? How long do you want the 0% to last? What fees will you have to pay? Will the card still make sense for you after the offer period ends?

Answering these questions before you apply can save you time, money, and, possibly, debt.

Read All of the Fine Print

All introductory offers have limitations, exclusions, expiration dates, and other rules that must be followed to claim the bonus rewards or 0% APR. These dates are very important and should be top-of-mind when you use your card during the offer period

Be sure to read the disclosures and make sure you understand the terms and conditions before you apply. 

This can save you plenty of stress in the final months of your promotional period, so you aren’t rushing to pay off balance transfers or spend money to earn bonus rewards.

Card introductory offers aren’t exactly free money, but they do offer attractive benefits without too much risk. 

And the sooner you apply for an offer, the sooner you could have the extra cash back, bonus travel rewards, or interest-rate vacation that meets your needs.