Everyone does it. Advertising 0% interest is commonplace in the retail marketplace. Merchants have been conditioned that this is how you drive traffic to a store. The results back this up, which is why it’s been a phenomenon in retail for many years.

The Trap of Zero Percent Interest

The dirty little secret of the retail industry is that the winner in this is not the consumer and not the merchant but, rather, the lender! The merchant pays dearly to be able to advertise and offer no interest financing. Whereas the consumer must meet stringent requirements typically to truly get 0% interest. Not only must they be well healed with their credit, but they usually must purchase a minimum amount AND pay off the entire balance within a short period of time. These are what we call the “gotchas” of deferred interest financing.

So why do merchants pay dearly to offer a financing product that is tantamount to walking a consumer towards the proverbial financial cliff? It’s because that is what has been available to them – until now!

SweetPay has just launched the TrueZer0™ promotional financing product on our rapidly growing fintech platform. TrueZer0 is a 12-month, true 0% interest program. This means when a consumer takes out a 36-month term loan, the first 12 months payments are calculated with no interest. Starting with the 13th month, interest commences with each payment going forward. This means they don’t lose the 0% interest benefit and only pay interest for the number of months after the 12 months that it takes them to pay off the loan.

The Math behind TrueZer0

The TrueZer0 difference is quite compelling. For example, on a $5,000 transaction with a 12-month promotional term, the typical deferred interest plan would require the entire $5,000 to be paid back within 12 months, making the average monthly payment quite large. And, if the consumer needs a longer timeframe to pay, the interest costs alone can climb well above $2,000. With TrueZer0, not only is the monthly payment kept low – before and after the promotional term – but the cost of interest is in the hundreds of dollars, not thousands. For consumers, they get the benefit of 0% interest without the “gotchas” of deferred interest products. For merchants, they pay equal to or less than the deferred interest products but are able to offer their customers a much better lending product.

A big benefit of this product is that it keeps the monthly payments low for as long as the consumer desires AND gives them the benefit of paying no interest for 12 months. A true 0% interest program is much better for the consumer and enables merchants to secure more sales by offering a longer and better pay-over-time program. Merchants pay approximately the same (or lower) in a merchant discount rate but, provide a vastly improved consumer financing product to their customers.