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Deferred Interest a Ticking Time Bomb

December 31, 2012
Plain English Version

If the ad says “No Interest,” read the fine print. Loans for purchases made with deferred-interest credit cards are risky. Consumers pay no interest for the loan. But if they are late on a payment or miss the last payment, they may be charged interest on the entire amount of the loan.

This kind of credit card is big business for major retailers, such as Amazon, Best Buy, Office Depot and Home Depot.

Watch out if you have not paid off the full amount of the purchase when the period ends. If you have only a small amount left to pay you could end up having to pay the interest charges for the full amount of the original purchase.

The interest rates can be as high as 25 percent.

Lawyers say the deferred-interest card is abusive and takes advantage of people who do not understand their rules. Some want to ban them.

Others say the credit terms are not clear and the penalties are too severe. Experts say only people who know they can pay off the full amount before it is due should use deferred-interest credit cards.

Retailers defend them by saying they help consumers purchase expensive items without finance (interest) charges. They say all the rules are sent to consumers in their monthly statements.

The best advice is to know what you are risking when you buy something with a no interest loan.

The Wall Street Journal

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