What to Do with a Lower APR Offer

Interest rates drive a lot of consumers’ credit decisions, as they should, because interest rates significantly impact the overall cost of debt. If you’ve ever received a credit card offer for a lower APR, whether it’s for a new card or a change to your existing account, you’ve probably wondered if it’s worth accepting.

There’s not a simple answer to that question, but here are a few things you’ll want to do when deciding how to respond to a low-APR credit card offer.

Read the Fine Print

To confidently make a smart decision, you need to know exactly what you’re dealing with. The envelope or email you receive probably has some big numbers in a bright color hawking an APR between 0% and 6%, which may be pretty appealing. (The average credit card APR is around 13% right now, according to Bankrate’s weekly interest rate report.)

“The APRs are pretty attractive right now,” said Bob Hammer, CEO of R.K. Hammer, a credit card consulting firm. “You can get 0% for 15 months almost anywhere. You can get balance transfer fee-free.” He added that you need to have good credit to qualify for such offers.

There’s more to those offers than a low APR: The promotional period will eventually end, and the rate often applies only to new purchases. Hammer said consumers need to take the time to read the fine print before applying for the card or new APR.

Think Beyond Interest

An interest rate isn’t the only thing that determines the cost of credit.

“Fees are as important to issuers as interest is in terms of revenue streams,” Hammer said. This goes back to checking the fine print. If you’re looking at higher fees in exchange for a lower interest rate, the change may cost you, rather than save you money.

Consider Whether You Need It

If you always pay your statement balance in full, without exception, then there’s little benefit to opting for a lower APR. On the other hand, a low APR may give you an opportunity to use the credit card to finance a large purchase.

“It could make sense, but any other purchases on that card will be charged interest immediately, because you’re carrying a balance and not paying in full,” said Gerri Detweiler, Credit.com’s director of consumer education.

Applying for a low APR could be a smart money-saving strategy, but make sure you understand the terms of the agreement before jumping at the low rate, as you should with any credit decision. Keep in mind you need good credit to qualify for the best interest rates, so before you apply, it’s a good idea to check your credit score. You can get two of your credit scores for free on Credit.com, updated every 14 days.