Deferred Interest

Full definition

Deferred interest is commonly used by retailers, healthcare providers, medical credit cards (CareCredit), and home improvement contractors. The marketing language 'same as cash' or 'no interest if paid in full in 12 months' signals a deferred interest arrangement. Why it is risky: Unlike a true 0% APR promotion where interest simply does not accumulate, deferred interest runs a hidden interest clock behind the scenes at the full rate (typically 26%-30% APR). The entire accumulated interest is waived only if you pay the full original balance by the promotional end date. If you have $1 remaining, you owe all the deferred interest retroactively. Example: $3,000 furniture purchase on same-as-cash 18-month financing at 29.99% APR. If you pay $2,990 by the end of month 18 but still owe $10, you are charged approximately $1,350 in deferred interest (18 months x 29.99% / 12 x $3,000 average balance). The $10 remaining cost you $1,350. How to handle deferred interest financing safely: Set a calendar reminder for 60 days before the deadline. Arrange your budget to pay the full balance at least 30 days early to avoid any last-minute payment timing issues. Better alternatives for most borrowers: A personal loan with a fixed rate eliminates the deferred interest risk entirely. A true 0% APR balance transfer card (not deferred interest) is also safer.

• Introductory APR
• APR (Annual Percentage Rate)
• Revolving credit
• Origination fee