Three Steps To Take Full Advantage of Zero Percent Interest Promotions

by Travis Pizel · 17 comments

pocket full of credit cards
Many retail credit cards offer zero percent promotional offers, and they sound like a great deal on the surface. Customers can buy what they want now, with no interest charges for six or twelve months, sometimes even longer. But there’s a catch. There always is.

The sales person may not always explain it, but the text is right there on your credit application or the terms and conditions of your credit card. If the balance is not paid in full by the end of the promotional period, the calculated interest will be added to your balance. Not starting the day after the promotion ends, but from the day the item was purchased. That’s an important detail that many people miss, or they don’t understand exactly how much it can cost them.

Additionally, retailers don’t provide any favors to help customers pay the balance in full by the end of the promotion. A minimum payment is required, but in most cases doesn’t come close to what would be needed to avoid interest charges. Customers get lazy, making only the minimum payment thinking they have plenty of time to make up payments later.

Earlier this year my wife and I purchased a sound system and a video projector for $1027.78 at an electronics store. We took advantage of a zero interest for twelve months promotion. What would happen if we made only the minimum payment for the duration of the promotion?

Interest Begins Accruing Immediately

It’s important to understand that interest calculations begin immediately. In the case of this specific creditor, the deferred interest is actually listed on our monthly statement. If the balance is not paid in full by the end of the promotional period, the deferred interest charges are added to the balance.

How Interest is Calculated

Interest charges are compounded daily using the daily periodic rate. The daily periodic rate is the annual rate divided by the number of days in the year. For this account the Annual Periodic Rate (APR) is 25.24% divided by 365 resulting in a daily periodic rate of 0.06915%. What this means is each day the creditor does the following:

  • The daily interest is calculated by taking the previous day’s balance multiplied by the daily periodic rate (0.06915%)
  • The daily interest charges is added to the balance
  • Any payments made on that day are then subtracted

This could be done by hand, but is very tedious and mistake prone. Luckily, it’s easy to search for an online calculators to help with the math.

If I only made the $25 monthly minimum payment, at the end of the twelve month promotional period I would have made $300 in payments, but $250.13 in deferred interest would be added to my balance. The result would be a net decrease of only $49.87, and I would still have interest accruing on a balance of $977.91.

Obviously the zero percent interest promotion wouldn’t be a very good deal if I let that scenario play out. I have no intention of letting that happen though.

Preventing from paying a single cent in interest on my purchase takes three easy steps:

Ignore the Creditor’s Minimum Payment Amount

As illustrated, making the minimum monthly payments won’t even get close to paying the full balance by the end of the promotion. This number should be ignored.

Calculating the Real Minimum Payment

Calculate the amount that must be paid each month to eliminate the balance by the end of the promotion. Take the purchase price and divide by the number of months in the promotion. In my case, it would be $1027.78 divided by 12, or $85.65 a month.

Round Up

We all have those months in which extra funds in the budget are helpful. By rounding your new minimum monthly payments up, customers can get ahead of the payment plan and create a little breathing room if needed. I rounded my monthly payment up to $100. So far I’ve been able to make my $100 payment each month, with only 3 months left until my balance is paid in full.

Zero percent interest promotions offer consumers the flexibility to make purchases that otherwise would have to be delayed by weeks or even months. But if the balance isn’t paid off by the end of the promotion, the purchase becomes extremely costly for the consumer.

Have you ever purchased something on a zero percent interest promotion? Did you pay the balance in full before the promotion ended?

Money Saving Tip: An incredibly effective way to save more is to reduce your monthly Internet and TV costs. Click here for the current Verizon FiOS promotion codes and promos to see if you can save more money every month from now on.

{ read the comments below or add one }

  • Ginny Newsom says:

    If you do this then you have another credit card that may impact your credit rating if you don’t use it after the initial 0% interest offer. The card may cost money like an American Express card with annual fees, and if you cancel the card your score will be impacted negatively. Not sure to what extent but it does.

  • Ryan G says:

    0% offers can be a great way to do some short-term financing of debt instead of dipping into savings, or can get you out of a bind without dipping into an emergency fund. The key is having the room in the budget and the discipline to pay the debt off before it is due. The 0% balance transfer offers on CC’s can be a great benefit, but come with a price… usually 3-5% of the amount transferred as a fee. So, basically you are paying a small interest rate up front for an interest free loan that can last anywhere from a few months to a couple of years depending on the offer. Not a bad deal, especially if you are in a bind.

  • John says:

    I use them. Whatever the term of the promo, I subtract 1 month – pay off a 12 month promo in 11. I never miss, and still get the benefit.

    • David @ says:

      Being safe always works, but I would try to stretch out the term a bit more to get the full benefit. (Sorry, I can be greedy like that sometimes! :))

    • Travis @enemyofdebt says:

      Great advice….usually multiple calls to the creditor will get you the right answer. You can’t get a bad representative every time, right?

  • Julia says:

    I’ve used 0% interest cards many times. I usually pay off the balance a few months before the promotional period, mostly out of impatience.

    One thing I’ve been concerned about is how do keep track of exactly when the promotional period ends? Is it X months from the date you’re approved? X months from the date you activate the card? X months from the first billing date? None of my cards has had the exact start date or end date anywhere noticeable. So, how do you keep from going a day past the deadline?

    • Ron says:

      “how do keep track of exactly when the promotional period ends?”

      The offer *always* says when it will end. *Always*. And they make it quite explicit.

      So you must be talking about something else.

      “None of my cards has had the exact start date or end date anywhere noticeable.”

      And you lost the paper describing the offer… 🙂

      Call the issuing bank. They’ll know when it ends.

      “So, how do you keep from going a day past the deadline?”

      The computer. I use a web bill pay service, and schedule repeating payments using it. Guaranteed to always pay on time and stop exactly when the offer period ends.

    • David @ says:

      Ron’s advice on calling the bank is on point. Just give them a call and the representative would be able to tell you over the phone.

    • Julia says:

      I thought I was clear in the second part of my question. I suppose I wasn’t. First, the date is on your paper/PDF statement, but not on any of the main websites I’ve ever seen. I mention this just to say, be careful.
      Second, I actually did call once that the person on the other end was pretty vague.
      My real question is/was more of if the date that’s listed says 4/27/2017, is the balance supposed to be zero by that date. Or is that date the final statement close date under which the 0% terms apply and your payment due date will be a few days later.
      Again, I’ve done this several times. I’ve just never gone right up to the very end of the term.

      • Travis @enemyofdebt says:

        I like John’s advice below…if you cannot get a straight answer from the creditor, just do the math to pay it off a month early. Usually if you call multiple times you can find someone that will give you the right info.

      • Ron says:

        “Or is that date the final statement close date under which the 0% terms apply”


        “and your payment due date will be a few days later.”

        I highly doubt it. There’s only one monthly payment due date for a card.

        After 27-Apr-2017, all that happens in that the interest rate on the remainder of the transferred balance jumps to whatever they said it would be.

  • Gary @ Super Saving Tips says:

    I’ve successfully used 0% interest offers and I always pay the balance in full before the promotional period ends. But you’re right that you need to read the fine print and understand exactly what you need to do to avoid any interest or penalties.

    • David @ says:

      Fine print – it’s what gets most people.

      Then again, I don’t think there would be any 0% offers if everyone just pays it off in full on time!

      • Ron says:


        It’s up to people who have learned discipline to take advantage of the fact that the banks hope that we don’t have discipline.

      • Travis @enemyofdebt says:

        True story, David…if they didn’t make a net profit off of the offers, they wouldn’t do it!

  • Ron says:

    This exactly how you should treat 0% CC balance transfer offers.

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