Expert recommends thinking twice when considering a deferred interest credit card
Nov 26, 2024, 6:00 AM
FILE - Credit cards are shown, Jan. 18, 2024, in Atlanta. Here are some of the pitfalls of deferred-interest credit cards. (Mike Stewart, Associated Press)
(Mike Stewart, Associated Press)
SALT LAKE CITY — If someone you know is thinking about getting a deferred interest credit card to help pay for the holidays, make sure they read the fine print.
Otherwise, according to Wallethub analyst Chip Lupo, the credit card user can be responsible for much more interest than they’d accrue on another credit card.
According to the Consumer Financial Protection Bureau, you have a deferred interest credit card if the paperwork you signed indicates that you won’t pay any interest on the purchase if the full amount is paid within a certain period.
If you don’t pay in full in your allotted time? “You’ll owe all the interest that’s accumulated on what’s left of that purchase, going back to the original purchase date,” Lupo said. “You’ll be penalized if you’re even a dollar short, or a day late, when paying back a deferred-interest credit card.”
Another way to think about it? The card company will add the interest you’ve accumulated to the amount you still owe.
And then you’re paying interest on interest. A lot of interest. Lupo says once the promotional period on the car has passed, the average interest rate is somewhere in the 20s. Or, it can even reach close to 30%.
Avoid getting caught with your cards down
If a salesperson seems unsure of the fine print, Lupo suggests walking away from using that form of payment.
Other suggestions from the Consumer Financial Protection Bureau include:
- make your minimum payment (at least) on the due date, but know that minimum payments may not add up to what you owe,
- know when your deferred interest payment period ends, and
- pay off your deferred interest amount well before the deferred interest period ends.
