How Promotional Financing Works: Offers, Timelines and Tips

Promotional financing offers can help you save money if you’re making a purchase and paying off the balance over time. The promotions generally offer either deferred interest if you pay in full within the promotional period or reduced interest on eligible purchases. Learn more about the different types of offers and what you may want to look for in the fine print.

What Types of Promotional Financing Offers Are Available?

Promotional financing offers on credit cards might come in several forms:

• Deferred interest. Interest accrues on eligible purchases, but it is deferred and won’t be charged if you pay your promotional balance in full within the promotional period. If you don’t, interest is charged from the purchase date.
• Reduced APR with fixed monthly payments. Your purchase may receive a lower, promotional APR, and you make fixed monthly payments. These fixed payments are designed to pay off the promotional balance within the promotional period. This structure can help make managing your finances easier.
• Reduced APR without fixed payments. You might receive a lower, promotional APR on every purchase you make during a promotional period. For example, some credit cards offer new cardholders an introductory 0% APR, and some card issuers occasionally give cardholders a temporarily reduced APR. You may have to make minimum monthly payments to avoid late fees and losing your promotional rate.

The specific pros and cons vary, but all the offers have a “promotional period” that eventually ends. Understanding what the timeline is for your promotion and knowing if anything changes when the promotional period ends are important to successfully managing promotional financing.

Understanding the Promotional Period

Each promotion might have its own promotional period. You might want to think of breaking this down into three important points:

1. Start. The beginning of the promotional period, which may be when you accept an offer or make a purchase. Review the offer’s terms and your billing statement for details. If your promotion has “deferred interest” or you have an intro APR that will end, figure out what your optional equal monthly payments might be. Then decide whether you’ll want to pay more than the required minimum each month in order to pay your balance in full during or before the end of the promotional period.
2. Midpoint. You may want to review your progress and make sure you’re on track to pay off your promotional balance before the promotional period ends. Consider whether you want to increase your monthly payment.
3. End. What happens at the end of the promotional period depends on the type of offer. With deferred interest promotional financing, if you don’t pay your promo balance in full within the promo period, you’ll be charged interest retroactively back to the purchase date. This interest will be added to your account when the promo period ends. You can avoid this by making a “balloon payment” before the end if necessary. With an intro APR offer, you may be charged interest on your remaining balance after your promotional period ends. And with Reduced Interest with Fixed Monthly Payments, if you make the required monthly payment shown on your billing statement, you’ll pay your promotional balance in full within the promo period. If you miss a payment or pay late, you may be charged a fee but you won’t be charged additional interest.

Real-World Examples of Promotional Financing

Promotional financing offers can feel a little abstract until you see them in action. Here are three fictitious, but realistic, examples of how someone might use a promotional financing offer.

Veterinary care with a deferred interest promotional financing offer

Emma rushes her pup Clive to the emergency vet after he starts acting odd during their morning walk. He’s OK, but the total bill comes out to $1,200. Emma uses her CareCredit credit card, which offers promotional financing with no interest if paid in full within six months.* Interest will be charged to her account from the purchase date if the promotional balance is not paid in full within the promotional period, and minimum monthly payments are required.

Even though the required minimum monthly payment on her billing statement is lower, Emma chooses to pay $200 each month to make sure she pays off the entire balance during the six-month promotional period.

Dental procedure with a reduced interest rate promo

Mike decides it’s finally time to get an implant to replace his missing tooth. He’s looking forward to his new smile, but he’s not looking forward to paying $4,500 — and that’s after dental insurance. After comparing several offers available with the CareCredit credit card, he narrows in on two options with a reduced APR and fixed monthly payments.** He could choose to pay $225 a month for 24 months with a reduced APR of 17.90% or $137 a month for 48 months with a reduced APR of 19.90%.

The fixed monthly payments and specific timeline make it easier for Mike to budget for the purchase and understand his total cost. He can choose between paying less interest with the shorter offer or making lower monthly payments with more time to pay.

Covering home maintenance with a 0% APR intro offer

Jane’s water heater gives out, and her partner is the only fan of cold showers. She finds a good replacement that qualifies for several energy-efficient rebates and tax credits, but it’s still going to cost her $2,000 to buy and install. Jane opens a new credit card with an introductory 0% APR offer on purchases during a nine-month promotional period.

She pays down the balance during the promotional period, knowing that any remaining balance will accrue interest based on the card’s standard APR once the promotional period ends.

What Happens If You Miss the Promotional Period End Date?

It’s important to track the promotional period’s timeline when you use a promotional financing offer.

With deferred interest financing offers, like Emma’s, interest accrues on the promotional balance from the purchase date. If you don’t pay the promotional balance in full by the promo period end date, the accruing interest is added to your balance. You’ll need to repay the remaining balance plus the interest.

With promotional financing with a reduced APR and fixed monthly payments, like Mike’s, the required monthly payment includes interest and is designed to pay the promo balance in full within the promotional period. However, you could make additional payments if you want to save on interest by paying the promo balance early.

With intro APR offers, like Jane’s, the promotional balance accrues interest at the reduced APR during the promotional period. If you don’t pay off the card’s balance before the promotional period ends, any remaining balance on your card will start to accrue interest at the card’s standard APR.

No matter the type of offer, review the terms to see what happens if your payment is late. In some cases, the card issuer may be allowed to charge you a late fee or end the promotional period early.

Maximizing Benefits by Paying in Full Within the Promotional Period

The main benefits of promotional financing offers are the option to pay for large purchases over time and to potentially pay less interest than you would, based on the credit card’s standard APR, or even no interest at all.

To make the most of promotional financing offers, be sure to make your required minimum monthly payments to avoid late-payment fees and potentially hurting your credit. But beware that with some types of promo financing, making only the required minimum payment each month might not be enough to pay off the balance before the promotional period ends.

To calculate how much you’ll have to pay monthly with a deferred interest or 0% APR offer, divide the balance by the number of months in your promotional period. You could then set up automatic payments for that amount to keep yourself on track.

If you have an offer with fixed monthly payments, you could also try to pay off the balance early to decrease how much interest you pay overall. It’s not always easy, but you could look for ways to cut back on nonessential expenses and put those savings toward your account balance.

Frequently Asked Questions About Promotional Financing

People often ask about how promotional financing offers work. Here are some quick answers to common questions.

Managing Health and Wellness Costs With the CareCredit Credit Card

If you are looking for an option to help manage your health and wellness costs, consider financing with the CareCredit credit card. Get the care you want or need with easy, flexible financing options that allow you to pay for out-of-pocket expenses over time.*** Use our Acceptance Locator to find a provider near you that accepts CareCredit. Continue your wellness journey by downloading the CareCredit Mobile App to manage your account, find a provider on the go and easily access the Well U blog for more great articles, podcasts and videos.

Your CareCredit credit card can be used in so many ways within the CareCredit network including vision, dentistry, cosmetic, pet care, hearing, health systems, dermatology, pharmacy purchases and spa treatments. How will you invest in your health and wellness next?

Author Bio

Louis DeNicola is a freelance writer who specializes in consumer credit, finances and fraud. He has several credit-related certifications and works with many lenders, publishers, credit bureaus, Fortune 500s and fintech startups.