What is an introductory rate?

As an incentive, some credit card providers offer introductory rates which are lower than average. An introductory rate lasts for a fixed period (usually 6 months or more). Once the deal ends, you’re moved to a higher rate. Your eligibility depends on the lender’s criteria, as well as your individual circumstances.

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What are the different types of introductory offers? 

The two main types of introductory offers are 0balance transfers and 0% purchase transfersSome providers offer credit cards that can be used for both purposes, but you may be charged extra for more flexibility. 

0% balance transfers 

balance transfer involves moving your existing debt to a new credit card. If you have multiple debts, moving your balances over to one card can make budgeting easier. Instead of juggling several payments, you’ll only need to make one payment to one creditor each month 

It can also cut the cost of borrowing down if you get a new credit card with a lower interest rate than you’re currently paying.  

Bear in mind that a transfer handling fee of around 2% may apply. If you’re currently paying a high rate of interest, then the savings may outweigh this initial fee. However, this is not always the case. To be on the safe side, it’s best to check the terms and conditions and do some sums before you apply. 

0% interest on purchases 

Having 0% interest on purchases allows you to spend without having to pay any interest. As long as you make at least the minimum repayment (on time, every time), you’ll enjoy interest-free purchases for the duration of the introductory deal. Remember thoughonly spend what you can afford to pay back, otherwise you could end up in financial difficulty. Plus, this offer is usually only available for a fixed period. 

What happens at the end of an introductory offer? 

When an introductory offer comes to an end, the interest rate usually goes up to the standard rate.  

Ideally, you want to pay off your credit card in full before your introductory rate ends. That way, you won’t pay any interest - and it’ll look good on your credit history. 

You can keep your credit card open after the deal ends, but you will be charged interest if you have an outstanding balance. To avoid paying any interest after this point, you'd need to repay the balance in full on time, every time.  

If you can’t clear your balance in time, you could consider moving it to a new 0% balance transfer card. Make a note of the date your current deal ends so you can start shopping around for a new card in good time. Bear in mind, you will need to make sure your credit history is in tip-top shape to qualify for the best offers. 

Am I eligible for an introductory rate? 

Whether you’re eligible for an introductory rate depends on your individual circumstances and the lender’s criteria. Your circumstances can also affect how long the offer lasts, how much you can borrow and the interest rate you’re given. 

If you’ve managed your money well in the past, this may reassure lenders that you are a low-risk borrower. As a result, they may be more willing to approve your application and give you more competitive interest rates.  

If you have bad credit, your options may be more limited, and you may face higher interest rates. This is because the lender will want to offset some of the risk from their point of view. However, there are also lenders who specialise in providing finance for people with poor credit histories  

Be aware, each credit application you make appears on your credit report – even if you are acceptedToo many applications made within a short space of time can put lenders off. It can give them the impression that you’re desperate to borrow. 

Keep this in mind if you’re thinking of applying for a credit card. Always shop around to find the best rate that you’re eligible for, before you apply. You can use an eligibility calculator to find out how likely you are to be accepted for a card. Ocean QuickCheck, for example, lets you know if you’ll be approved for a credit card before you apply – without leaving a mark on your credit report. 

Can an introductory offer be terminated early? 

Yes, it can be under certain circumstances. Although a 0% introductory rate will be fixed for a set periodyour lender can revoke it if you don’t stick to your agreement. It could be cancelled for several reasons, including if you: 

  • miss payment or don’t pay on time 
  • go over your credit limit  
  • make cash withdrawals using your credit card 

If the introductory rate is terminated early, you could be left with an expensive card and no benefits. Any missed payments will flag up on your credit report for six years. This can negatively impact your ability to get credit in the future. 

Tip: Set up a direct debit for at least the minimum payment so you never forget to pay. Then plan to clear the balance in full before the introductory rate ends. 

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