What Is Deferred Interest And How Does It Work?

“Six months – No payments! No interest!” sounds great to buy something on credit. But what is the “fine print” of offers like that? WalletHub states that 61% of people are unaware of how deferred interest works. How does it work?

Let’s say you find a great buy on an HD TV. The TV is normally $2,000, but you can buy it for $1,000, and you choose to pay for it using the store’s credit offer of “Six months – No payments! No interest!” As long as you pay off that full amount during those six months, life is good. You paid no interest. However, many people don’t pay anything during that time, because they don’t have to! But the downside is that whatever balance you still owe at the end of those six months, that company goes back to your purchase date and hits you with an interest charge for every single month. That can add up quickly – especially when WalletHub says the average store interest is now a record high of 33.07%. You will end up paying more than $1,000 for that TV.

So, if you can afford the purchase, and if you can pay it off during that no interest time period, then it could be a good deal for you.