Don’t get clobbered by ‘no interest’ credit offers
It's a mighty tempting offer: buy now -- on credit -- with no interest for up to 18 months!
Before you take the plunge make sure you understand a deferred interest offer works.
You get zero percent for a specific time period, sometimes six months, a year or longer.
But if you miss a payment or have any balance left at the end of that grace period, you get clobbered.
Odysseas Papadimitriou, CEO of the website CardbHub.com, explains what happens.
"Then they go back to the original purchase date and then assess you interest as if you never had the zero percent and they usually do that at the rate of 20 percent."
That's right, with these deferred interest programs you could be hit with interest on part of the balance you already paid.
What's does Papadimitriou suggest?
The best way to avoid this trap is to avoid any financing from retailers and instead rely on traditional zero percent interest rate credit cards."
For more information
Credit Card Deferred Interest Study
Before you take the plunge make sure you understand a deferred interest offer works.
You get zero percent for a specific time period, sometimes six months, a year or longer.
But if you miss a payment or have any balance left at the end of that grace period, you get clobbered.
Odysseas Papadimitriou, CEO of the website CardbHub.com, explains what happens.
"Then they go back to the original purchase date and then assess you interest as if you never had the zero percent and they usually do that at the rate of 20 percent."
That's right, with these deferred interest programs you could be hit with interest on part of the balance you already paid.
What's does Papadimitriou suggest?
The best way to avoid this trap is to avoid any financing from retailers and instead rely on traditional zero percent interest rate credit cards."
For more information
Credit Card Deferred Interest Study
What they hope is that once you get that stores credit card, you come back and buy more and more. What you originally owed will get mixed with your new purchases, then only a small percentage of your payment will goto that original promotion and it will not get paid off in time. They will make sure it works like that.
No problem. If it's 18 months I just divide the amount by 18 and round up to the nearest $10. Make the payments EVERY month and it's paid before the 18 months is up. You just have to be disciplined.
Last time I had a big bill at a tire store the salesman offered me the no interest for six months deal. He was forceful in telling me that I MUST pay the monthly minimums (or more) AND that I MUST pay off the entire balance before the six months anniversary. This man was totally honest with me about the terms of the no interest deal.
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Yes, I did pay the entire amount in five months and incurred no penalties.