Retailer who offers one of those 0% financing schemes, here. TL;DR: It's from processing fees paid by the retailer and punitive interest after the 0% promotional period lapses.

The lender makes money in two ways. One, a percentage fee is charged on the financed amount, but it's not paid by the customer. It's paid by the retailer. For us it is a little under 2%, similar to the fees most credit card processors charge. So as soon as you make your purchase, the bank instantly skims 1-point-whatever percent off the top. You don't see this, though. It affects the retailer's bottom line, not yours.

Two, the 0% interest rate is a promotion which provides specified limited time in which to pay off the balance. If you do not pay the outstanding balance in full by the end of the promotional term, the bank whacks you for a monstrous interest rate on the entire original transaction amount -- not just the remaining outstanding balance. In our case this is damn near 30%. Look carefully at the promotional signage and literature. It will always say "0% INTEREST FINANCING!!! ~for~ ~12~ ~months.~" That 12 months is important. That's the end of the promotional terms, after which you pay aforementioned buttload of interest.

And then, the minimum payments on the bills they send you are obviously deliberately structured to trick you into failing to pay the entirety of the balance by the deadline at the end of the promotional period.

If you're talking 0% introductory rates for general purpose credit cards, the answer is right there in the name. Those are introductory rates designed to entice you into signing up and using the card, but they're never permanent. Eventually that introductory rate will expire and you will be left with an interest bearing credit card. Possibly a lot of interest. Even if you pay your bill 100% on time every month without fail, the bank still makes money in percentages and processing fees taken on every transaction from every single retailer where you've swiped that card. The bank issuing the credit card can continue to comfortably make money even if no one pays any interest, ever.

They make money on the penalty default rate. They know what the average rate of default is, and they know how many people they plan to sign up. On average they make money. The 0% is to draw large numbers of customers in knowing that some percentage will default and of that percentage they will be able to collect on yet another percentage. This is why the default rate is like 24.99% or something silly like that.

It's often zero interest and zero payments required for 6 months or a year or whatever. The trick is that if you don't pay it off within that time, then the interest from the whole period accrues.

In addition to what everyone else in this thread has already covered, the credit card issuers benefit from you having that card in your wallet because they charge the merchant for every transaction. So you're having the merchant pay the credit card company with every swipe, in exchange for whatever benefits the card provides to you.

^^ This guy got chased out of the temple by a furious Jesus Christ /s

Usually those are only 0% for a certain period of time. After that, the interest rates are typically higher than average.

So if you utilize it and pay it off completely during the 0% phase, they really don't make any money. They make money when you carry a balance past that, or if/when you continue using that line of credit after the 0% period has ended.

That's my understanding, anyway, as I have seen 0% APR offers, but they always are for a limited amount of time.

That, or there's some kind of massive penalty if you miss a payment or something. Definitely read the fine print lol.

0% interest offers show up fairly frequently in the USA, often as general-purpose credit cards, or for car or furniture payments, in addition to the many buy-now-pay-later services that allow financing almost anything. However, the motives for offering 0% are slightly different for each of these products.

But answering the question directly, a 0% offer is beneficial if you were already going to make the purchase and would finance it. Cheap credit makes it easy to overspend, since the payments will be "tomorrow's problem". For people who can afford to pay for something in full, it might still be beneficial to finance with 0% just to conserve cash on hand. But the tradeoff is having to service the debt with regular payments; missing one payment can cause the debt to resume at an exorbitant rate. It takes a decent amount of financial discipline to make a 0% offer work in your favor.

Going back to why 0% offers even exist, I'll use furniture and cars as they're the historic examples. Furniture is expensive, whether it's a sectional sofa or a queen-size bed with frame and storage. There's also a sizable markup for furniture, and competition between furniture stores is strong. Thus, to help entice people to buy furniture, sellers will offer 0%, outsourced to a loan company, with the loan subsidized by some of the profit margins.

For cars, the equation is slightly different. Sure, cars are an order of magnitude more expensive, but that also means the opportunity cost for dealers to offer 0% is correspondingly larger. Instead, 0% financing for cars is almost always subsidized by the manufacturer, not the dealers. This is a financial and business strategy that allows a car company to create more sales in a given quarter, if perhaps they need to meet certain year-end targets but are reluctant to reduce their list prices.

0% car loans induce more sales fairly quickly, but will draw on the company coffers in the years to come, because the loan company still wants their cut to be paid by someone. Consumers will usually benefit from these offers, as it's rare for people to buy a new car outright.

It's my opinion that if a car company has to subsidize loans to move their product, that's a tacit admission that their product is wrongly priced or the competition is better. I would take this into consideration, although it wouldn't necessarily carry the day when considering a purchase. After all, car payment interest is not insignificant.

Because people are poor and/or stupid.