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What is deferred interest and should I take advantage of it?

On Behalf of | Dec 10, 2016 | Credit Card Debt

With the holiday shopping season in full swing, credit card offers abound from Tennessee retailers and credit card companies alike. One of the perks that many of these stores offer is something called deferred interest. While it sounds like that might be a good thing to advantage of, there are some risks associated with it that you may wish to be aware of.

According to CNN, deferred interest is pretty much what it sounds like. If you make a purchase today, you do not pay any interest on it for a certain amount of time. Once that grace period is over, if you have not paid off the balance in full, interest kicks in.

If you know that you will have the money to pay off the purchase before the grace period ends or are just more comfortable with making multiple payments, then that may be a good deal worth taking advantage of. But if you are relying on an income source that may be uncertain, you could wind up paying significantly more if you are unable to pay it off in time.

Unfortunately, some retailers are not upfront with customers about the implications of deferring interest. Oftentimes, the interest rate that kicks in at the end of the grace period is much higher than an interest rate on your regular credit card. In addition, interest sometimes ends up being applied retroactively, so if you do not pay off the balance by the end of the grace period, you may end up being charged for interest for that period anyway.

So unless you think you can definitely have the full balance paid off in time, you may wish to avoid offers of deferred interest. This should not be considered legal advice and is general information on this topic only.


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