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Deferred interest credit cards: What are they?

Make a purchase now and pay it off later without interest.

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Deferred interest, also known as special financing, is an option provided by retailer credit cards that lets you make purchases now and pay them off later without interest.

But deferred interest credit cards are different from 0% intro APR credit cards.

How does deferred interest work?

A card with a deferred interest feature lets you buy eligible items and use an interest-free period of between six and 48 months. The fine print here is you get an interest-free period as long as you pay your purchase in full before the interest period expires.

For example: If you make a $2,000 purchase with a 12-month deferment period, you have 12 months to pay off that purchase interest-free. But if you fail to pay off that purchase in full, you’ll be charged 12 months of interest on that initial purchase amount. And these cards often have interest rates north of 20%.

Benefits of deferred interest cards

Aside from the obvious benefit of saving money on interest, you could also enjoy:

  • Repeated deferred interest financing option. With a 0% intro APR credit card, you get no interest on your purchases for a limited time only. Deferred interest is usually offered repeatedly. For example, once you pay off your balance, you can make another purchase and use the no-interest period again and again.
  • No annual fee. This type of card often costs nothing to own.
  • Store benefits. Other benefits include rewards on your purchases, discounts or free shipping.
  • Low credit score requirements. When credit cards are concerned, retailers are usually less picky than banks are. In many cases, you can get a store card with a poor or fair credit score.

What to watch out for

Although deferred interest is a convenient way to pay off your large purchases, there are some drawbacks to consider.

  • May accrue interest if not paid in full. Read the card’s terms and conditions as some retailers may require you to pay the full interest from the day you made the purchases if you don’t pay off your balance in full before the interest period ends.
  • High-interest rates. Aside from the deferred interest options, other purchases may accrue high interest if not paid in full before the due date.
  • Higher minimum payment. In most cases, you will have to make a certain minimum payment each month, which is often higher than the standard 1% to 3% other credit cards offer.
  • May not use the card elsewhere. Since retailers are typically the ones who offer deferred interest credit cards, you may not be able to use the card elsewhere to make purchases.

Who offers deferred interest?

Retailers that offer store credit cards are often the ones who provide deferred interest on purchases made at their store. Here are some of the more popular deferred interest card options:

  • Amazon Prime Store Card Credit Builder
  • PayPal Credit

Deferred interest alternatives

If deferred interest sounds risky to you, there is another option — a 0% intro APR credit card. These cards come with an interest-free period on purchases or balance transfers between six and 20 months. The cool thing about this is that if you fail to pay off your balance before the intro period is up, you only accrue interest on any unpaid balance, not on the entire balance retroactively.

Compare 0% intro APR cards

Blue Cash Everyday® Card from American Express

★★★★★

Finder Rating: 4.6 / 5

Rates & fees
Go to site

Minimum credit score

670

Annual fee

$0

Purchase APR

0% intro for the first 15 months (then 13.99% to 23.99% variable)

Balance transfer APR

N/A

Rewards

2% at US gas stations and select US department stores, 3% at US supermarkets on up to $6,000 per year, then 1% after that and on all other purchases

Welcome offer

$200 after spending $1,000 in the first 3 months

Citi® Diamond Preferred® Card

★★★★★

Finder Rating: 4.6 / 5

Go to site

Minimum credit score

740

Annual fee

$0

Purchase APR

0% intro for the first 18 months (then 14.74% to 24.74% variable)

Balance transfer APR

0% intro for the first 18 months (then 14.74% to 24.74% variable)

Rewards

N/A

Welcome offer

N/A

Frequently asked questions

Do all store credit cards offer deferred interest?
No, but most of them do. Make sure to read the card’s terms and conditions before you apply for a card.

Do I get to choose how long I pay for my purchases without interest?
No. This is usually predetermined by the amount of your purchase. Larger purchases are often the ones you can carry the longest.

But this also means you’ll pay an incredibly high interest if you don’t pay the full balance before the period ends.

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