“Zero percent” has several economic designs
Merchant-funded promotions are a form of customer acquisition and sales financing. A merchant may pay the lender a discount fee to compensate for some or all of the interest not charged during a promotional period. Synchrony’s filing describes merchant discounts and distinguishes , no-interest and reduced-interest offers; these are company disclosures, not universal market terms. [1]
A true no-interest plan generally does not add promotional-period interest if the balance remains at maturity, while deferred interest may make accrued interest payable if the required payoff condition is missed. Disclosures and product terms control. Regulation Z defines finance charges and governs disclosures; marketing shorthand cannot replace the account agreement. [2]
Illustrative unit economics
Suppose a $1,000 purchase receives six months of promotional financing. The lender expects a merchant discount of $80, funding costs of $25, servicing and fraud costs of $15, and an expected credit loss of $30. Before overhead, the simplified contribution is $10. If default losses rise to $50, contribution becomes negative $10. These are hypothetical assumptions, not reported company economics.
For the merchant, the fee can be justified by higher conversion, average ticket size or incremental sales, but only if the uplift exceeds discount cost, returns and cannibalization. For the lender, outcomes depend on repayment after promotion, customer selection, utilization and loss severity. A promotion with long duration can create higher funding cost even when nominal is zero.
Consumer risk and controls
Clear checkout disclosures should state whether interest is deferred, when the promotional period ends, the required payment and consequences of an unpaid balance. Issuers should test statement reminders, payment allocation, hardship and complaint patterns around expiration. Merchants and lenders should reconcile cancellations, returns and refunds with the promotional balance, particularly when goods are delayed or returned. [2]
Promotions can expand access or lift sales, while complex terms and balloon payments can surprise borrowers. Evidence needed for a conclusion includes offer-level conversion lift, incremental sales, payoff rates at maturity, complaint data and credit losses across . Published aggregate card data will not identify a particular merchant’s actual subsidy.
Sources
- Synchrony Financial — 2025 Form 10-KFiling / reportBack to text: ↑
- Regulation Z §1026.4 — finance chargeOfficial textBack to text: ↑1↑2
- CFPB — Consumer Credit Card Market Report 2025Official source