How do credit card companies make money giving customers 0% APR?
Whilst interest on accrued balances is a major revenue stream for credit card companies it is not their only source of income. Every time you pay for something via a credit card they take a cut — the merchant providing you with the goods pays either a flat fee or a proportion of the transaction value to the credit card company as a “processing fee”. This is why some smaller (or low-margin) retailers charge customers an additional fee if they wish to pay by this mechanism. However, the real purpose of these schemes is to cause customers to make full use of their card during a promotional period leaving them with debts which they can’t clear immediately when the interest rate returns to its normal value. They then end up making a reasonable profit on the interest paid after that period. Additionally, short-term 0% APR schemes are predominantly used to attract new customers and to persuade existing customers to transfer their balances. In the first case, profit over the lifetime of the c
