Are Deferred Interest Offers a Good Deal?

According to WalletHub, around 40% of the major retailers offering 0% financing use a potentially dangerous feature called deferred interest, which has the potential to make holiday purchases up to 27.5 times more expensive than expected. 

Let’s say you buy a $2,000 bed on sale for only $1,200 with the promise of “no payments, no interest for 12 months!” Is it a good deal? Yes, if you pay off that $1,200 bed within those 12 months, as you won’t pay any interest. However, some people don’t pay anything during those 12 months because they don’t have to. Then many are surprised to discover that the fine print said the retailer then charges retroactive interest for every single month since the purchase! An interest rate of for example 26%, can result in a charge of over $300 in interest at that point. 

So if you are confident that you can pay off the entire balance of something during that free 6, 9, 12 or however many months, then a deferred interest deal can be fine. But if you’re not sure if you can pay it off during that no interest period, then it may be best to pass on that offer to avoid a nasty, expensive surprise.

For more strategies and a free, confidential, non-judgmental budgeting/financial counseling appointment with a caring financial professional, contact CCOA at 479-521-8877 or schedule an appointment online. Appointments are available in person, by phone or online.