Reminder: Beware Of Deferred Interest Credit Card Offers This Holiday Season

Whether you shop online or at brick-and-mortar retailer this holiday season, you’ll undoubtedly be offered countless chances to save money with store-branded financing options offering “0% interest” for six, 12, 18 months. These can be incredibly tempting, but many people don’t realize they are often signing up for deferred interest accounts that can come back to bite you on the rear-end in a very nasty way.

As opposed to true 0% interest offers, where you are not accruing any interest during the introductory promotional period, a deferred interest card account is actually accruing that interest during those months and you’ll have to pay it all if you haven’t paid off the balance in full by the end of the intro period.

To illustrate the difference, use this example of an $800 computer. One card offers a true 0% interest offer for six months. A second card is a 0% deferred interest account for six months. Both have 20% APRs (which is about average for retailer-branded cards) after their intro periods.

If you pay off that $800 before the six months is up, you don’t have anything to worry about in either case. But if you need a seventh month, the difference is huge. That extra month will only hit you with around $2 in interest for the true “0% for six months” offer. But if you need a seventh month and you used a deferred interest card, you’ll be hit with all of the interest that has accrued during the six months, which is around $55.

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