What is Deferred Interest Credit Cards: You may frequently hear about it as a part of the promotional offers of credit card providers, but people are confused about what deferred interest is and how those types of credit cards can help. With partial interest, one need not have to pay the accumulated monthly benefit up to a particular promo period. If you pay off the balance entirely during the promo period, interest waived by the providers. However, if you default the payment even after the promo period, then all benefits accrued from the very first day of purchase get added to the balance.
The deferred interest credit cards will let the users carry the balance from one month to another without having to pay the interest. Any such balance on the map over time does accumulate interest. However, you will only have to pay that interest if the full balance is paid off with a certain set date. It can vary from one month to even six months in some introductory offers of credit cards. The accrued interest is applicable if the payment not made with the specified time.
With such a unique offer, deferred interest cards may offer many benefits to the users; however, you have to know about all the terms and conditions associated with this card, or one may end up in deep trouble in terms of payments on defaulting.
What is Deferred Interest Credit Cards
How will these cards be helpful?
Using a card which with deferred interest will enable the cardholders to pay off for more significant purchases over time without any interest until the delayed interest expiration dates. Say, for example, if you purchase a TV which priced $1,000. You may not have that much cash off-hand to buy it in the next two months. If you tend to buy that with a credit card with an APR of 17% and hold the balance for two months in a row, then the interest accrues may be close to $28.50. In case of a deferred card, you are not tied to payment of that interest if you can make the $1000 payment in full within the delayed interest period.
If the deferred interest period is six months (which is so in many cases), you need to pay any additional amount. However, if you forget about the deferred interest expiration date even by a day or two, then you will end up owing the 17% APR for the entire duration of the loan from the first day on for $1000.
Who offers deferred interest cards?
Usually, deferred interest credit cards availed by the individual retailers on specific purchases. While you pay for the purchase and the cashier may ask you if you want to apply for a store credit card, then you can check if they have any deferred interest promotional offers. Such an offer will be beneficial when buying something pricey. In effect, it is similar to getting an interest-free loan, and you can pay off the balance in a relaxed way.
Read through all terms and conditions and check the patterns how the interest gets accumulated and what the actual APR calculation is to understand how much you will owe on defaulting the date in an unfortunate situation. Sing up for the card only after fully understanding the terms and conditions and by ensuring that the deferred interest period is fully interest-free.
Some troubles with deferred interest cards
It may always sound great to have a deferred interest credit card in hand if you don’t have funds in hand to pay for something outright. However, even though this credit card can help defer interest, there are a few negative aspects also to watch for while considering deferred interest credit cards. Let’s have an overview of these things too.
- Full interest applicable: As we have seen above, the major issue with deferred interest is that you have to pay the interest balance fully on defaulting.
- Higher interest rates: The APR of deferred interest credit cards may be higher for the providers to cover the risk.
- The beautiful prints: Deferred-interest credit cards often come with a lot of terms and contingencies other than just paying off the balance in full before the end. Say, for example, late payments of the balance can also negate the offer of deferred interest. Ensure that you go through all the terms and conditions before signing up for such an offer.
- Payments over minimum: As per Federal Law, the credit card providers are required to apply for monthly payments over the minimum needed to balances against the highest interest rates. If you, however, make an amount more than the minimum due, then such payments also may not be considered under deferred interest card purchases if there other items in the same credit card having a higher APR.
- Another exception in the rule is like if you pay for more than minimum amount during the last few billing cycles during the promotional period, then your payment must be applied to deferred interest balance.
Everyday things to keep in mind to avoid deferred interest payments
If you are planning to choose deferred interest financing, here are a few things to consider to avoid ending up in trouble with the need to pay off a higher interest.
- Plan properly – Do the calculations before you initiate a purchase to ensure that it rightly fits your budget to schedule the payments accordingly. It is also essential to have a back plan too in case if your plan #1 doesn’t work.
- Make a payment on time – It is essential to set an automated amount or reminders to ensure that you make all payments at the right time. Many of the deferred interest options opt you out even when there is one single late payment. Ensure that you bill it on time each month.
- Pay more than minimum if possible – If the providers allow, then it is a good idea to add something more to the minimum balance per month, which will help you pay off the balance in a better way within the deferred interest period.
You have other options too apart from deferred interest credit to consider if you think you can’t save up enough cash to pay for something. You can apply for personal loans or can look for a 0% introductory offer by the manufacturer itself without the need for enrolling for any deferred interest cards
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