Deferred interest explained

When it comes to credit cards and other financial products, it’s sometimes easy to overlook the fine print or gloss over confusing or unfamiliar terms. Consider “deferred interest.” 

Deferred interest delays finance charges for a specified time period. This frees you from paying interest as long as the purchase is paid off during the special financing window. Deferred-interest options can be offered on credit cards and loans, plus in-store, home repair and medical financing.  

If the amount is not paid off by the date required, you may be charged for all the interest accumulated from the date of purchase. This can be a significant amount of money. With interest-free financing offers, find out first if there’s a deferred-interest provision. It can counteract the intended savings if you don’t understand how it works.

How to avoid deferred interest charges

The only way to avoid deferred-interest charges is to pay the balance in full before the special financing period ends. For example, when taking advantage of limited-time 0% financing, keep in mind you have limited time to pay. Having payments automatically deducted from your bank account or setting due date reminders can help you keep up with the payment schedule. 

Check your progress regularly and try to make payments early. The more frequently you pay ahead of schedule, the better your credit and overall financial standing will be. Building a budget, and tracking it monthly, can really help here.