The Benefits of an Introductory Offer Credit Card

Introductory credit card offers may benefit consumers in several ways. A few years ago, credit card companies inundated the market with introductory credit card offers for clients with good credit, such as offering a 0 percent APR on balance transfers from other cards. With the economic downturn, however, these offers have subsided a bit, but now they are slowly making an appearance once again. If you have received an excellent introductory offer from a credit card company, there are a few benefits of taking the offer.

1. Emergency Funds

Accepting an introductory offer on a credit card is one way to keep emergency funds in your wallet. If you do not use the card for ordinary purchases, the introductory offer can provide you with a cushion in case of sudden unemployment, household emergencies and other urgent conditions that may drastically impact your financial security when cash-on-hand is low. For this benefit, you need a rolling 0 percent APR balance transfer, and you must remember to roll the balance off of the card before expiration of the introductory period. Additionally, you must be extremely disciplined to realize this benefit. After all, the funds are for emergencies only, not a family vacation or a new flat screen.

2. Pay Off High Balances

If you have a credit card with a high balance, you can greatly benefit from a balance transfer introductory rate. Many credit card companies are now offering customers 0 percent APR and no fees on balance transfers. You can pay off the high balance on a credit card on which you may be paying 8 percent or more in interest by transferring the balance to the new card. However, be sure to cut the original card up or retire it! There is no point in realizing the savings by transferring the balance to the new card only to run the original card up once again.

3. Use Introductory Offer to Lower Your APR on Other Cards

If you receive introductory offers for credit cards you do not yet have, use the offers to request a lower APR from a credit card you possess. A BankingSense.com blog post demonstrates that APRs can be lowered by negotiations with your credit card company, and introductory offers from other cards may be your ace-in-the-hole for negotiating a lower rate. A 2002 study found that 56 percent of credit card users who requested a lower APR were granted their requests, many by as much as a six percent reduction.

To pursue this option, gather all introductory offers you have received and then call your credit card company. Have in mind how much of a rate reduction you are seeking. If you speak to a representative and she refuses to help you, ask to speak with her supervisor and threaten to cancel your account. If you are still unsuccessful, wait and try again on another day.

4. Balance Transfer Arbitrage

Way back when savings accounts and some checking accounts paid respectable interest rates, some consumers would practice an arbitrage strategy where they would obtain an introductory rate on a credit card, extract a large amount of cash on the card, and then deposit the cash into an interest-bearing bank account. She would then withdraw the cash and pay of the card before the introductory period expired, pocketing the profits. However, because interest-bearing accounts currently have such a low rate of interest, this strategy no longer benefits the credit card holder.

The Negatives of Introductory Offers

You may find a few negatives with introductory offers, as well. According to another blog post here on BankingSense.com, lower APRs provided by introductory rates may encourage consumers to carry a balance on the card. In addition, cards with low APR introductory rates may charge other fees, such as an annual fee or a usage fee. Be sure to consider all fees when determining the best credit card for you.

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