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Credit cards offering introductory interest-free periods and special financing options may seem like a quick and easy way to get out of debt or finance new purchases. But they sometimes also carry the risk of deferred interest charges.
Many of the cards with deferred interest tend to include terms like “no interest if paid in full” within a certain amount of time or “if the balance is not paid in full by the end of the promo period […] interest charges will be imposed from the purchase date at the purchase rate.”
What that means is if you continue to carry a balance once your intro or special financing period ends, you will be hit with all the interest you accrued since the date you made your purchase. This is known as deferred interest and you may also see it called retroactive interest.
If you’re someone who doesn’t typically carry a balance month to month and you’re confident that balances will be paid prior to the end of an intro or special financing option, deferred interest shouldn’t be a big deal. However, it’s something you should beware of — especially if you tend to carry a balance. If that’s the case, check out our tips at the end of this post. We recommend avoiding cards that charge deferred interest, and there are plenty of cards with 0% intro APR periods that don’t charge deferred interest.
Check out our roundup of the best balance transfer cards, with many of the cards listed offering 0% intro APR periods for new purchases.
How do I know if my credit card charges deferred interest?
You can find out if your card charges deferred interest by looking at the terms and conditions of your cardmember agreement. It may seem overwhelming to skim through the entire agreement to find out if there’s deferred interest, so a helpful tip is to open your card’s T&C online, then select the keys CTRL + F (if you’re on a Mac, command + F) to search for the terms “deferred interest.” This should bring you to the deferred interest mentions, if applicable. You may also need to search for “retroactive” or “paid in full.” Also, some cards that charge deferred interest may list the terms in the fine print on the landing page of a special financing option.
Otherwise, you can simply contact your credit card company via the phone number on the back of your card and ask a customer service representative.
Find our top picks for low-interest credit cards here.
Examples of deferred interest credit cards:
Amazon.com Store Card* and Amazon Prime Store Card*
- The offer: “Special financing options are available on all orders of $149 or more. Pay no interest if paid in full within 6, 12, or 24 months as applicable.” Currently, the APR is 27.49% variable. Terms apply.
- The deferred interest mention: “Interest will be charged to your account from the purchase date if the promotional balance is not paid in full within the promotional period. Minimum monthly payments are required.”
Lowe's Advantage Card*
- The offer: “No interest if paid in full within six months. Offer applies to purchase or order of $299 or more on your Lowe's Advantage Card.” Currently, the APR is 26.99%. Terms apply.
- The deferred interest mention: “Interest will be charged to your account from the purchase date if the promotional purchase isn’t paid in full within six months … No interest will be assessed on the promotional purchase if you pay the promotional purchase in full within six months from the purchase date. If you don’t, interest will be assessed on the promotional purchase from the purchase date.”
Barclaycard Visa® with Apple Rewards*
- The offer: “No interest if paid in full within the promo period. Special financing on purchases made at Apple within the first 30 days of account opening:
- 6 months: less than $499
- 12 months: $499 to less than $999
- 18 months: $999 and over”
Currently, the APR is 15.49%-28.49% variable. Terms apply.
- The deferred interest mention: “Interest will be charged to your account from the purchase date if the purchase balance is not paid in full by the end of the promotional period or if you make a late payment.”
What if I have a deferred interest credit card?
Avoiding a credit card with deferred interest may not be an option if you already have one, but you can potentially avoid the deferred interest charges by following a few simple tips:
- Pay your balance in full before the special financing period ends. This lets you benefit from the offer without being hit with deferred interest.
- Keep spending to a minimum. Many cards charging deferred interest offer various special financing options each time you make a qualifying purchase. It can be easy to rack up numerous charges because of the interest-free period, leading you to fall into debt. We recommend using special financing options sparingly so you don’t incur deferred interest charges.
- Set a reminder two months before your special financing period ends. When you have two months left, evaluate if you need more time to pay off your debt. It’s OK if you can’t afford to pay off your balance before special financing period ends — you can transfer it to a balance transfer card that offers an intro 0% APR period and no deferred interest. By transferring your balance to a balance transfer card, you avoid the deferred interest charges you’d incur if you continued to carried a balance on the deferred interest card.
*This offer and/or promotion has since changed, expired or is no longer available.