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What’s a Deferred Interest Credit Card?

Last Updated: November 8, 2024

4 min read

Table of contents

Key Points:

Deferred interest credit cards can help users minimize interest payments by postponing interest charges until a certain date.
A deferred interest card can be helpful if you plan to pay off the credit card balance before the interest payment deferral period ends.
Deferred interest offers are different from 0% APR (annual percentage rate) offers.

Deferred interest credit cards allow you to carry a balance from month-to-month. Any balance you hold over time accrues interest, but you will only owe that interest if you don’t pay off the balance before a certain date when the deferred interest period expires.

In the event you don’t pay your balance before the deferred interest period is up, the total accrued interest will get added to your balance.

Deferred interest cards have several benefits. When you know how these cards work, you could avoid paying interest.

Introductory APR vs. deferred interest

Deferred interest: There’s a period when interest won’t add to your monthly payment. But if you don’t pay off your statement balance within that period, you’ll be responsible for all the accrued interest that accumulated during the deferral period (at the interest rate stipulated in the terms).

Introductory APR: When a credit card features an introductory or promotional period of 0% APR on purchases, there’s no charge of interest on purchases during that period.

Did you know?

When an introductory or promotional period ends, any remaining balance will begin to accrue interest from that date forward at the standard purchase APR. There’s no additional interest related to the intro period.

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What’s a deferred interest credit card and how does it work?

A deferred interest card is a card with a delayed interest payment. They work much like deferred interest loans or a deferred payment on a student loan.

Using a credit card that defers interest allows you to pay off purchases over time without having to pay interest, so long as you pay off the balance before the deferred interest expiration date.

Say you’d like to purchase a television that costs $1,000, but you won’t have enough cash to buy it outright for another two months. If you purchase the TV on a credit card that defers interest for 12 months with a 17% APR and hold that balance for two months, roughly $28.50 in interest will accrue. You’re not liable for this interest charge just yet. You’ll only owe interest if you don’t pay off your balance before the 12-month deferred interest promotion is up.

If you pay off the balance within those 12 months, you’ll purchase the TV with an interest-free loan.

On the other hand, if you forget about the deferred interest expiration date and go past it, you’ll end up owing $1,000 (minus any payments you made) plus 12 months of interest.

Remember to read the terms and conditions with any deferred interest offer. Good things to know are:

Deferred interest financing details (interest amount if applied, final payoff date, late payment penalties)
Payment schedules
Minimum payment requirements
What happens if you don’t pay off the balance by the deadline (payment schedules and how interest is applied)

A deferred interest card will only save you money if you pay attention to the explicit rules that determine when and how interest is charged.

Tips for managing deferred interest credit cards

If your goal is to save money, you should avoid paying interest whenever possible. This mentality is no different with a deferred interest card and a traditional credit card. Though, it can be tempting to spend beyond your means when you know that the interest added to your account doesn’t show up on your balance month-to-month.

Track your deferred interest

One way to curb your spending is to keep track of your deferred interest balance and how much interest is accrues along with it. Simply knowing how much money you owe—and how much interest you could owe—may be enough to prevent overspending. This information will appear on your monthly credit card statement with your accrued expenses and is worth keeping track of.

Set up autopay

Another strategy is setting automated payments for at least the minimum payment due. Deferred interest cards may cancel the deferral period if you miss payments or don’t make the minimum monthly payment. This can be an innocent mistake that ends up costing hundreds of dollars in interest. These penalties paired with penalty APRs will put you in bigger debt. When you have large debt, it could reflect on your credit report (as a high credit utilization ratio) and negatively impact your credit score.

Set a reminder

It’s also wise to set a calendar reminder for a few weeks before your card’s deferred interest period ends. This way, the date will be on your radar. What if you can’t afford to make a payment for the entire balance? Make your minimum payment (or more if you can). Then, calculate the interest for after the deferment period. With that information, you can develop a payment plan to pay off the remaining balance over time after the promo period has ended.

How to avoid credit card interest charges

The simplest way to avoid interest charges on purchases altogether is to pay your statement balance in full every month. Your credit card issuer might have a grace period, which means that you will not pay interest on new purchases if you pay your statement balance each month in full.

Using a credit card with an introductory 0% APR for a limited time is another way to make purchases without incurring interest. Note that the balance you carry when the introductory period expires will have interest charges applied.

When using a card featuring an intro 0% APR, it is important to know the standard purchase APR that will apply when the promo period expires.

Does Discover feature credit cards with deferred interest?

No, Discover does not offer credit cards with deferred interest. However, you can review Discover’s current credit card offers to find those that may include an introductory APR.

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