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How deferred interest credit cards can cost you a lot of cash


Black Friday shoppers carry their purchases to a Best Buy in San Carlos (California), U.S.A, Friday, November 26, 2021.

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Make sure to understand what you’re signing up for before you take advantage of a special discount or financing deal at a retailer.

A majority of credit card companies offer deferred interest cards, but 56% of Americans aren’t sure how to use them, according to a personal finance website study. WalletHub found. The October polling showed that it was able to survey more than 300 adult Americans.

You could end up paying a lot more if you don’t have the right knowledge. Although you do not have to pay any interest, or you can get a lower rate of interest over a certain period, you might end up paying a significant regular APR on your original purchase amount retroactively if you make a late payment or owe less than $1 during the promotional period.

According to WalletHub, if $800 was charged on a regular credit card with a 0% promotion for six month and you take seven months to repay it, then you would owe $2 interest. This assumes a 20% annual percentage rate. With a deferred-interest card, you’ll wind up paying about 27.5 times that amount — or $55 in interest — in the same scenario, the website found.

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Jill Gonzalez, senior analyst with WalletHub, stated that this not only negates the savings, but also means you pay more for the item.

According to WalletHub’s survey, 77% of those who understand deferred interests think that it is unfair, while 69% believe it should be illegal. (View WalletHub’s listing of deferred-interest credit card retailers. here.)

Experian reports that Americans hold an average 2.33 credit cards, with an average card balance of $1,887. 2021 State of Credit Report. They charge higher interest rates than most credit cards. According to WalletHub they average an APR of 27.93%.

It may seem tempting at this time to get a deferred-interest card to grab great deals. holiday gifts. Gonzalez explained that even though busy stores can mean lengthy lines, there is also the potential for pressure to sign up and not read all terms.

You can choose to receive special financing, or get a first discount on your purchase. She recommended that you do so, as there is no obligation.

Take the deferred-interest offer and make sure to listen, understand the terms, and complete the payment before the initial period expires.

You can be certain that there are credit cards for retailers that don’t offer deferred interests. They also have 0% intro APRs on purchases, which lasts on average 16 month. Two-thirds of the cards provide ongoing rewards in the form a points system. WalletHub analysis found.

Consider the retailers that you shop at throughout the year, not just your local one. holiday shopping, Gonzalez said. For instance, stores like Target Kohl’sShe suggested that cards could be offered with benefits such as discounts and rewards.

You must not accumulate any debt.

Gonzalez claimed that people are definitely spending. Gonzalez said that there’s a lot more demand than ever before and inflation is making certain products costlier.

There is a chance that you’ll over-leverage and end up spending money you don’t have.

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Mike Robinson
Mike covers the financial, utilities and biotechnology sectors for Street Register. He has been writing about investment and personal finance topics for almost 12 years. Mike has an MBA in Finance from Wake Forest University.