Introductory rates are making a comeback

In the past, many consumers' credit cards came with initial offers with relatively low interest rates for the first several months, but those went away during and following the recent recession.

Now, however, those types of offers are making a comeback, according to a report from ABC News. Data from the market research firm Ipsos shows that currently, about 80 percent of all credit card offers mailed directly to consumers came with a reduced introductory interest rate in the first quarter of the year. That was up from just 40 percent, observed in 2009 at the height of the economic downturn, when many consumers were either defaulting on their credit card accounts or trying to reduce spending on them by any means necessary.

Further, credit card lenders are also trying to increase the value of introductory offers in other ways as well, the report said. Data shows that Titleist golf balls and reduced-price tickets to NFL games have also started to hit the credit card offer market in recent months, as lenders scramble to add more customers and increase their revenues.

The value of these offers
Simply giving consumers a low interest rate for the first few months an account is open might not be enough to entice them to open a new card, the report said. Many may still be hesitant to add to the number of accounts they have in their name, and lenders are juicing their offers by extending the introductory periods, with rates as low as 0 percent in some cases, to anywhere from six to 18 months, and most last right between those two numbers at a full year.

Of course, prior to the recession, it was not uncommon for consumers to actually receive introductory periods of as long as two years, the report said. But once the recession hit, offers with several months of lower rates largely went away, and those that stuck around were slashed to typical maximums of six months.

What's changed
Lenders may simply be feeling more comfortable in extending these types of offers to consumers because their own finances are improving, the report said. Consumers' credit health has been on the uptick for more than a year now, with instances of delinquency and default having fallen significantly and borrowers generally doing a better job of keeping their debt totals under control. As such, many issuers may feel that Americans can generally be trusted more than they could in late 2010 or even as recently as the middle of 2011.

That added trust could be what led directly to the newer, longer intro periods, the report said. Now, issuers might generally feel as though consumers are in a better position to deal with whatever debt they take on, even if it's over the course of a year.

Potential dangers?
Of course, with these introductory offers comes significant responsibility for borrowers, the report said. It might be nice to pay minuscule interest rates, or even avoid them entirely, for an entire year, but when that initial promotional period ends, borrowers may be in for a bit of culture shock as they adapt to the ongoing terms of their cards.

When introductory periods expire, the rate on such a card will likely increase significantly, the report said. These can range anywhere from 9.99 percent for consumers with the best possible credit, who will likely also receive the longest and most beneficial intro terms, to as much as 25.99 percent for those whose borrowing history is rockier.

What can be more troubling for some borrowers is that the terms of these credit card agreements stipulate that any balance not paid off before the initial period ends could be subject to retroactive charges, the report said. For instance, if a borrower has $500 left on the account when the promotion expires, they might be on the hook for interest charges at their ongoing rate, dating back to when they took on those debts. That can add significant amounts to their overall balances and potentially make what was intended to be a beneficial offer rather costly.

Whenever you're thinking about opening any type of new credit card, you should first check a copy of your credit report. This is because there may be unfair markings on the document that can have an adverse effect on your credit score, and therefore deny you access to accounts you should otherwise be able to tap. If you discover any such markings on your credit report, it may be a good idea to work with a credit repair law firm to fix your credit, and get you back to where you deserve to be.