Too Good to Be True

Beware deferred interest credit cards

It’s easy to fall for credit card deals when they sound so good. The offer of zero interest for one full year can be downright mouth watering. However, in some cases, things are not what they seem. Especially when it comes to deferred interest credit cards from big box retailers.

The aforementioned offer is often doled out by retailers. If you’re buying an expensive item, like a new TV, they know a zero percent interest offer will tempt you. Some zero percent cards, like those from credit unions, offer much better long-term details. Before you sign up for a card from a store, think it through. As CNNMoney reports, the offer of “no interest for one full year” doesn’t even mean there’s no interest. It still accumulates. The key is if you pay off the card in full by the end of 12 months, you won’t get hit with the interest charges. If you don’t, boom! You’re looking at 12 months of back-logged interest. It doesn’t matter how big your balance is either. If you have $2.45 left on a $700 balance, the interest built up over that year is charged all at once. Also, often zero percent cards will have a double digit interest fee once the promotional period ends. That means you’re stuck with a card with a giant interest charge, simply because you wanted that introductory deal.

Before you sign up for a promotional card from a retailer, think about the long-term ramifications. Know when your promotional period ends. Go into the deal with a detailed plan of how to pay it off before the interest kicks in. Make sure you check what the interest rate will be when the deal is over. That way you’ll know if it’s something you can stomach over the long haul.

Chris O'Shea

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