Credit card promotional offers are reliable when you are in a pinch and need to make big-ticket purchases. Many of them offer promotions for a specified period of time, but they’re not always super easy to understand. It helps to know the difference between zero interest and deferred interest with promotional offers. Knowing which one you signed up for will help you understand what will happen to your credit card balance when the promotional period expires.
What is zero-interest financing?
You may have gotten an offer such as zero percent interest for six months. This kind of promotional plan means you will make minimum required payments for six months and interest will not accrue. If you pay the balance in full before the six-month promotional period expires, you will not have to pay interest on that purchase.
If you still have a remaining balance after the six-month period is up, interest will begin accruing on the remaining balance only. You will not have to go back and pay interest from the date of the purchase. If you know you can make your payments on time, this option is close to making a cash payment but in installments.
What is deferred-interest financing?
Another kind of promotional offer is deferred interest for six months. Compared to a zero interest offer, there is a major difference in the amount of interest you could be responsible for paying. This kind of promotional plan means you will make minimum required payments for six months, but interest will be accruing.
So if you still have a remaining balance after the six-month period is up, interest will have accrued on the entire balance from the date of purchase. You will be responsible for paying that interest in addition to the remaining balance and any interest that balance continues to accrue.
Know what you are getting into
With all credit card promotional offers, you should read the fine print. There may be other obligations you have to meet besides fulfilling all payments before the due date. Some companies require customers to make all minimum payments on time to avoid penalties. They may also have a minimum purchase amount to qualify for the promotional offer. Also, pay attention to rules for how they apply payments if you have other purchases outside the promotion.
Are credit card promotional offers worth it?
As long as you understand the terms, credit card promotional offers can be very beneficial. Having access to one could keep you in your vehicle if costly repairs come up. It could also spare you from putting a dent in your savings or emergency fund.