How does the Bank Make Money on Zero Percent Offers?
They make money in a couple of ways.
Their prime way of making money on the Zero Percent offers is Penalties on Late Payments. Also if you are late on One payment you will automatically be bumped into one of their higher rate categories on your remaining balance.
Initially they will charge you the transaction fee. This has gotten much larger since I first started using zero cards in the early 1990s. It used to cost me a maximum of $25 even on a $15,000 zero percent transaction. Now many of the offers charge 3% on the total amount of the offer. This can be significant interest because it occurs as a front end load and often the Zero offers are good for only six to ten months.
First if you miss a payment or are late the penalties and the increase in your rate will be huge. They have no tolerance to be nice if you are a day late with your payment especially on your zero percent account.
If you add more charges to this card the interest will start immediately (No Grace Period) and you will pay interest on your purchases until the card is paid off. They will not add future charges to your zero percent balance.
If you do not pay off the total before the term of the zero percent offer expires you will be charged a higher rate on the remaining balance than normal.