My Credit Card Company Offered Me a Low Promo APR. Here's Why I Didn't Accept It

A few weeks ago, I saw that I had a special offer for one of my American Express cards: A promotional APR of 6.99% for six billing cycles. That's super low for a credit card. The average credit card interest rate is 21.19%, according to the most recent Federal Reserve data. My card's promotional APR is more in line with what mortgage lenders charge.

Even though this is a low rate, I didn't activate the offer. Because with offers like these, it's often the card issuer that comes out ahead.

Low APRs are how card issuers get people to spend more

There are a few ways credit card companies make money. For starters, they get a cut of the fees merchants pay on every credit card transaction. But the way they make most of their money is interest charges when cardholders carry a balance from month to month.

So the more you spend, the more money your card issuer makes in transaction fees. It makes even more if you don't pay off your card and start incurring interest charges. In 2022, Americans paid about $164 billion in credit card interest and fees, according to a WalletHub analysis.

One of the many ways card issuers convince you to spend more money is with these low promotional APRs. Since the interest rate is so much lower, you might feel as if you can take your time paying off your balance. But even with a lower APR, you're still paying interest. It's better to avoid this whenever possible.

Also, after the promotional period ends, your card will go back to its standard APR. Your card issuer can then charge that APR on any balance you have left over. If your credit card's interest rate is anywhere near the average, you'll likely be paying over 20% per year. On a $2,000 balance, that's over $400.

It's better to pay in full -- or get a 0% APR credit card

The reason I don't bother with promotional APRs is because I always pay off my credit cards by the due date. A 6.99% interest rate doesn't wow me, since I never want to pay interest on my credit cards in the first place. If I carried a $1,000 balance for six months at that rate, I'd still pay about $35 in interest for no reason.

It's good to get into the habit of paying your cards in full. This way, you can take advantage of all the benefits the top credit cards offer, like rewards on your purchases, bonus offers, and purchase protections, without losing money to interest. For example, many cash back cards allow you to earn 2% or more back on purchases. That can be an easy way to save more money, but not if you're paying 20% in yearly interest charges.

If you need to carry a balance, the best option is a credit card with a 0% intro APR. If you have a good credit score, you can likely qualify for one, and a 0% APR is as low as it gets. There are two types of this card available:

• Credit cards with a 0% intro APR on purchases don't charge interest on new purchases for the intro period: These work well if you have a large purchase coming up that you need to pay off over time, such as a home remodel.
• Balance transfer credit cards have a 0% intro APR on balances brought over from other cards: These are a popular way to pay off credit card debt. You can transfer over your other cards' balances, pay a small balance transfer fee (generally 3% to 5%), and then pay no interest on your balance transfer card for the intro period.

Even with a 0% intro APR, only carry a balance if you absolutely need to. You're still going into debt when you carry a balance. And if you don't pay it off during the intro period, you'll start getting charged interest.

Just like promotional APRs, 0% intro APRs are a tactic to get you to spend money and carry a balance. You can use them to your benefit, if you make sure to pay off your balance as quickly as possible. But if you don't need them, stick to your normal spending habits and pay your credit cards in full.