It’s so tempting to open a store credit card when you’re making a big purchase, especially when it’s an emergency. Six months to pay off a $1,500 washer-dryer set (after your old one took its final spin cycle) could prevent you from blowing a big hole in your budget.
But if that store card gives you a payment plan with deferred interest, you could be setting yourself up for an expensive mistake. Especially this year, when millions of Americans are struggling financially and are more prone to messing up this too-good-to-be-true deal.
How Does Deferred Interest Work?
Do you understand how deferred interest even works? If not, you’re not alone — 52% of Americans don’t, either*.
Deferred interest is usually accompanied by an enticing “special financing” offer, giving buyers the opportunity to pay off a large purchase in installments with no, or low, interest rates when they use a store credit card. Which is actually an incredibly helpful tool for people on a budget.
The problem arises when minimum monthly payments are a day late or any amount of the original purchase price is left after the promotional period is over. Those situations will trigger the deferred interest clause, meaning you could be responsible for high interest payments on the entire purchase price — even if you already paid off most of it.
So that $1,500 washer-dryer set? Even if you only had $150 left to pay off, you could be looking at nearly 27% APR on the entire payment. That could be an extra $405 you owe.
And right now, with millions of Americans struggling financially, the temptation to open a new credit card to take advantage of a deferred interest payment plan can be huge. But it has also become too easy to miss a payment deadline or not be able to pay off a bill in full.
What If You’ve Already Been Hit With a Deferred Interest Payment?
Unfortunately, many people don’t realize how dangerous deferred interest is until it’s too late. And getting slammed with a massive payment can make a bad situation even worse, as it’ll just keep adding up until you pay it off.
But the inability to pay it off is what got them into that mess in the first place, so paying it off before more interest accumulates can seem impossible. The debt will just continue to grow.
One way to quickly stop the snowballing interest payments is to consolidate debt with a low-interest personal loan.
With help from a free website called AmOne, you could wipe out all of that credit card debt by the end of the week.
AmOne will match you with a low-interest loan to pay off all your credit cards at once. Its interest rates start at 3.49% — way lower than the 20% or more you’re probably paying your credit card company. That could save you thousands in the long run.
Plus, you’ll be debt-free that much faster.
AmOne keeps your information confidential and secure, which is probably why after 20 years in business, it still has an A+ rating with the Better Business Bureau.
It takes two minutes to see if you qualify for up to $50,000 online.
*Source: WalletHub Deferred Interest Study 2020
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.