Understanding Promotional Financing: What It Is & How It Works

Picture this: your refrigerator breaks down; within a day, all your food starts to spoil. You don't have enough savings or cash on hand to buy a new one, but you can't exactly go without it. What do you do?

A credit card with promotional financing might be the answer. Deferred interest promotional financing can allow you to pay for big-ticket items with the CareCredit credit card and make required monthly payments for a certain period of time, such as six, 12 or 18 months, with interest assessed only if the promotional balance is not paid off within the promotional period.¹

Although promotional financing can be a financial lifesaver (or food saver, as in our example above) to manage unanticipated costs, using this method of payment does require careful planning.

What Is Promotional Financing?

Promotional financing is using a credit card to pay for big-ticket items and then paying the promo balance off over a period of time. Federal law requires that promotional rates must last at least six months, and common payment periods are six, 12 or up to 60 months.¹

This method gives you more time to pay for something that you might not have the money for at the moment.

If you do not pay off the balance within the promotional period, you may have to pay interest, fees and/or a higher rate on the remaining amount.¹

Three Types of Promotional Financing

It's not just private-label credit cards that offer promotional financing for purchases. General-purpose credit cards often do, as well. For example, a card may offer promotional introductory rates for new cardholders and other promotional financing offers for existing cardholders. Some credit card issuers also extend promo rates for balance transfers.

Many promotional financing offers fall into one of three camps:

1. Zero interest
2. Deferred interest
3. Reduced APR with fixed monthly payments

1. Zero interest

Zero-interest financing may be advertised as "0% APR for 12 months," or however long the promotional period lasts. "APR" stands for "annual percentage rate," and it reflects the rate of interest you'll pay on your balance.² And 0% is just what it sounds like: you won't pay any interest on that purchase for as long the agreed-to promotional period lasts, but you still need to meet the monthly minimum payment, which may be $30 and up.³

With some zero-interest financing, if you fail to make even one month's payment, depending on the card issuer, your promotional financing could be canceled altogether (and you may owe a late fee).⁴ Once the promo period is over, the interest rate that will be charged on the remaining balance is typically much higher than the promotional rate, so be sure to read the fine print.¹

2. Deferred interest

Deferred-interest financing means you won't pay any interest if you pay your promotional balance in full by the end of the agreed-to promotional period.

Interest still accrues from the date of purchase, though, so if you don't pay off the balance in full by the end of the promotional period, that accrued interest will be assessed and added to your balance. Depending on your purchase cost, that could mean shelling out an additional significant cost.¹ Deferred-interest financing may also be advertised as "No Interest if Paid within X Months."

3. Reduced APR with fixed monthly payments

With this type of promotional financing, you pay for your qualifying purchase over a specified amount of time with a reduced APR. For example, “14.90% APR with 24 Monthly Payments." Monthly payments are based on the initial purchase amount, a promotional fee (if applicable), and an interest rate. If you miss a payment, you may lose the promotional APR and be charged a late fee.⁵ (With the CareCredit credit card you will not lose your promotional APR.)

How Promotional Financing Works With CareCredit

CareCredit's promotional financing options can help you pay for out-of-pocket health costs (including for your pets!), that cosmetic procedure you've always wanted or other health and wellness expenses that aren't covered by insurance. CareCredit offers two types of promotional financing options:

1. Deferred interest financing. No interest if paid in full within six, 12, 18, or 24 months on qualifying qualifying purchases of $200 or more at enrolled provider locations and select retailers in the CareCredit Network. Interest will be charged to your account from the purchase date if the promotional balance is not paid in full within the promotional period. Minimum Monthly Payments required.*
2. Reduced APR financing. Reduced APR and Fixed Monthly Payments Required Until Paid In Full on qualifying purchases made with your CareCredit credit card at enrolled provider locations in the CareCredit Network.** Purchases of $1,000 or more are eligible for a 24 months offer with a 17.90% APR, 36 months offer with a 18.90% APR, 48 months offer with a 19.90% APR. Purchases of $2,500 or more are eligible for a 60 months offer with a 20.90% APR.**

These promotional financing options help make it easy to meet your health wants and needs and manage your finances. Additionally, CareCredit's online tools and mobile app, including an Acceptance Locator, help you make decisions, manage your budget and even pay a provider directly.

Additional Tips About Promotional Financing

Promotional financing with credit cards may make sense when you want to pay monthly over time. As long as you keep on top of your payments and watch the calendar, these offers can be helpful for any budget. Use these tips to make the most of your promotional financing offer.

Understand when the promotional period ends

Try to pay off your balance prior to that date. Check to see if the required minimum monthly payment is adequate to pay off the balance in time.

Make on-time payments

This should be consistent throughout the promotional period. It's important not only for meeting the terms of your promotional financing, but also for protecting your credit score and steering clear of late fees.

Keep track of your promotional purchases

If you have other purchases on the same card during the promotional period, make sure you understand how any excess payments above the minimum payment will be allocated.

If excess payments are allocated to non-promotional balances, it could cause you to fall short of your final pay-off goal by the end of the promo period. Contact your credit card issuer if you have questions or would like to ask about allocating payments differently as you may have some discretion.

Managing Health & Wellness Costs with The CareCredit Credit Card

If you are looking for an option to help manage your health & wellness costs, consider financing with the CareCredit credit card. The CareCredit credit card can help you pay for the care you want and need and make payments easy to manage.*** 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. Outside of work, you can often find Louis at his local climbing gym or cooking up a storm in the kitchen.