Promotional Period Meaning
The promotional period is the segment of time when the cardholder receives an offer from the issuer that normally is zero or very low APR on unpaid balances.
It can be 0% APR (OFFER 04 code), a very low APR, or a promotion on a specific merchant (OFFER 05 code, OFFER 15 code, and many more).
Federal law requires that promotional periods must last at least six months. Despite the minimum requirement, many of the best credit cards have promotional rates that are longer, even as long as 21 months 1.
Once the promotional period finishes, the unpaid balances will go at the standard APR and you will notice the different entries in your credit card statement to acknowledge this status. The entries are OFFER 04 PROMOTIONAL APR ENDED and OFFER 04 MOVED TO STANDARD PURCH.
How To Calculate Interest After The Promotional Period
It is important to know how to calculate interest after the promotional period if you have an unpaid balance, or if you usually have unpaid balances.
Calculating the interest after the promotional period can be done in three easy steps:
- Find your current APR and current balance in your credit card statement.
- Divide your current APR by 12 (for the twelve months of the year) to find your monthly periodic rate.
- Multiply that number by the amount of your current balance.
For example, if you currently owe $500 on your credit card throughout the month and your current APR is 17.99%, you can calculate your monthly interest rate by dividing the 17.99% by 12, which is approximately 1.49%. Then multiply $500 x 0.0149 for an amount of $7.45 each month. Therefore, you should have been charged $7.45 in interest charges based on your $500 balance.
How to calculate your daily interest on a credit card after the promotional period
Your credit card company may calculate your interest with a daily periodic rate.
Calculate your daily APR in three easy steps:
- Find your current APR and current balance in your credit card statement.
- Divide your APR rate by 365 (for the 365 days in the year) to find your daily periodic rate.
- Multiply your current balance by your daily periodic rate.
For example, let´s suppose that our promotional period has just ended and we have 500 dollars of unpaid balance:
So if the current balance is $500 for the entire month, and the APR rate is 17.99%, you can find your daily periodic rate by dividing your current APR by 365. In this case, your daily APR would be approximately 0.0492%.
By multiplying $500 by 0.00049, you’ll find your daily periodic rate is $0.25. In order to calculate the monthly interest charges to your balance you simply need to multiply this daily periodic rate by the number of days in your billing cycle which is 30 days in almost all cases.
I am David, economist, originally from Britain, and studied in Germany and Canada. I am now living in the United States. I have a house in Ontario, but I actually never go. I wrote some books about sovereign debt, and mortgage loans. I am currently retired and dedicate most of my time to fishing. There were many topics in personal finances that have currently changed and other that I have never published before. So now in Business Finance, I found the opportunity to do so. Please let me know in the comments section which are your thoughts. Thank you and have a happy reading.
