How 0% APR credits make money?
I mean, the price of the product is the same, I'm taking a loan for the duration of the credit but paying no interest?
What's the catch?
I can keep my money making a bit of interest instead of giving it right away and without increasing the price of what I was already planning to buy. When or why wouldn't I choose 0% credits?
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They make money on the penalty default rate. They know what the average rate of default is, and they know how many people they plan to sign up. On average they make money. The 0% is to draw large numbers of customers in knowing that some percentage will default and of that percentage they will be able to collect on yet another percentage. This is why the default rate is like 24.99% or something silly like that.
This is part of it.
But also you almost always only get those offers on transaction where they still make comfortable profit on the product if you just treat the interest they're subsidizing as a discount on the product.
Yes they're still charging the merchant fees on your purchase which is often overlooked.
I wasn't thinking credit cards. Those promotional offers are just customer acquisition. They're short term before they charge the normal interest rates.
I was thinking more like car dealers offering 0% APR, which is really just some discount off the sticker price.
Right its usually either 0% APR or "$XXXX Cash Back" offer and both work out to be a discount off the sale price. I believe the APR is usually the better way to go but it can vary depending on the actual numbers.
Yeah, and increasing your buying power can talk you into making a larger purchase than you might otherwise have made.
They don't even have to default.
Most of those aren't 0% forever. After a year or two, it's just a regular credit card, with regular shitty interest.