Promotional purchase rate credit card offers

How do promotional purchase interest rate credit cards work?

Purchase rate credit cards provide you with a promotional low or 0% APR on purchases for an introductory period. For example, you may find a card that offers a low rate of 7.99% APR on purchases for six months. This means that any eligible purchases you charge to your credit card during the introductory period of six months – which begins once the card is activated or once you’re approved for the card – will accrue the promotional interest rate.

At the end of the promotional period, any remaining balance from your purchases will be charged the standard variable interest rate for that card. So, if your standard APR on purchases is 19.99%, any unpaid balance and any future purchases will accrue this new interest rate.

Does the introductory purchase rate apply to all of my transactions?

As the name suggests, a promotional purchase rate credit card gives you a deal on eligible purchases only. Ineligible purchases often include cash advances transactions and gambling purchases, as well as any balance transfers.

When does the promotional purchase rate start?

The promotional offer will begin either from the time the card is activated or from when you’re approved for the card. If the purchase rate promotion begins from the time you’re approved, you’ll miss out on the special interest rate for a week or two while your card is sent to you in the mail. You can find information about when the purchase rate promotion begins by reading the fine print or by contacting the provider.

If your card has a six-month promotional period on purchases and you make your first purchase a month after being approved for the card, you would only have five months left to pay off the balance before the standard rate applies. So, if you have a big purchase in mind and want to make the most of the promotional interest rate, you should make the purchase as soon as possible after being approved for the card, in order to give yourself more time to pay it off before the standard interest rate kicks in.

How long does the promotional offer last?

These types of deals are introductory offers and last for a limited time only – which is usually between six and 12 months, depending on the card.

Before you apply, consider how much you’ll need to pay each month to pay off your balance in full before the promotional period ends. If you don’t think you’ll be able to repay your balance before the promotional offer is over, you might want to look for a card with a longer promotional period or consider transferring your debt to a balance transfer credit card.

What happens to my balance after the introductory purchase rate ends?

At the end of the introductory purchase period, any unpaid balance from the promotional period will accrue interest at the standard purchase rate of interest which usually sits between 12% and 20%. Any purchases you charge to the credit card from then on will also accrue interest at the standard purchase APR for that card.

Bottom line

If you’re about to make a big purchase or you’re simply looking to carry a balance on your credit card for a few months, a credit card offering a promotional purchase rate might be a good solution. However, it’s important to remember that the low or 0% purchase rate is only available for a limited time and a higher revert rate will apply on any remaining balances and future purchases.

If you want to get the most out of your promotional purchase rate credit card, make your purchase early on, pay more than the minimum repayment each month and make sure you’ve paid down the entire balance before the promotion ends.

Frequently asked questions

• Why can't I find a credit card with 0% APR on purchases for a set period of time?

  Promotional purchase rate credit cards are uncommon in Canada, so even finding one with a low promotional interest rate, such as 8%, can be hard.

• Can I have a purchase rate and a balance transfer promotion active at the same time?

  It is possible; however, it’s extremely rare to find this sort of offer in Canada. In other countries, such as Australia and the US, these types of dual promotions are common.

  Some cards offer a low or 0% purchase rate on both purchases and balance transfers simultaneously. This means that when you transfer a balance to the card and use it for purchases, both balances will accrue 0% or low interest. While these cards can come in handy if you need to consolidate debt and also have some purchases planned, it’s important to remember that you have two balances to pay off before the promotional offer ends.

  That said, if you have a large balance to transfer and want to focus on paying down your debt, it might be best to just consider a low or 0% balance transfer credit card and hold off on making any more purchases until you’ve repaid your debt in full.

• What if my card comes with both interest-free days and a promotional purchase rate offer?

  The beauty of a purchase rate promotional offer is you can pay back a balance over a couple of months without incurring excessive interest charges (or any interest at all).

  Interest-free days only apply if you pay back your entire balance by the credit card statement due date. For example, if you have a purchase rate credit card with 7.99% for six months, to get interest-free days you would need to pay back the balance of the card every month. In this case, interest-free days are essentially redundant while the purchase rate promotion is in place. However, if you plan to continue using the credit card beyond the purchase rate offer, the interest-free days could be a useful safety net if you plan to pay your balance in full each month.