Credit Card Zero Interest Promotional Rates refer to a low or zero interest rate offered by credit card issuers over a certain period of time. This is usually an incentive for new cardholders and it’s valid only few months after opening a new account. Occasionally, some credit card issuers offer promotional rates to existing credit card users.
How Zero Interest Promotional Rates Work
Zero interest promotional rates remain valid for at least six months. This is the minimum length of time required by federal law. However, many of the best credit cards offer promotional rates that last as long as 21 months. Having a longer promotional period gives you more time to pay off your balance without paying any interest.
The timing of the promotional rates varies by credit card issuer. Some credit cards express the promotional rate as a number of billing cycles which may be shorter than the same number of months. For instance, a 6 billing cycle promo rate would last around 4 months (assuming a 25-day billing cycle).
Your promotional rate is generally locked in for the promotional period. However, you could lose your promotional rate prematurely if you are behind on your credit card payments before 60 days. At that point, the credit card issuer will apply the higher penalty rate to your balance until you’ve made your payment on time for six months in a row. Once you’ve lost the promotional rate, you won’t get it back, even after clearing the old payments.
Certain Balances Get Promotional Rates
In the past, it was more common for promotional rates to be offered only for balance transfers as a way to attract new credit card customers. However, more credit card issuers are extending the promotional rates to both purchases and balance transfers. Cash advances rarely receive promotional interest rates.
Paying Off Balances With Zero Interest Promotional Rates
By law, credit card issuers are required to apply the minimum payment to balances with the highest interest rate. Anything above the minimum can be applied to the lowest rate balance. Because of this, it’s best to limit your credit card transactions to just one type – the one that gets the promotional rate – at least until your promotional rate expires. That way you can be sure your payment is going to the balance with the best interest rate.
To get the maximum value from your promotional rate, you should pay off your balance before the promotional period expires. This is especially true if you’ve transferred a high interest rate balance from another credit card.
What happens after the promotional period?
Don’t always be carried away by the promotional rate. After that period, the interest rate can be quite high. In fact, you should know what the post-promotional interest rate is going to be before you accept the offer. It may change your mind about the deal completely.
Promotional Rate vs Deferred Interest
Deferred interest financing plans are often promoted similarly to 0% introductory offers. The same “No interest” and “0%” phrasing often accompanies these offers. However, deferred interest is very different and not in a good way. With deferred interest financing, you must pay the full balance to avoid paying interest. If you have any balance left over after the promotional period ends, the full interest backdated to the first day of your balance is added to your account.
With a promotional APR, unpaid balance do not begin accruing interest until the promotional period ends.
