Deferred-Rate Cards Can Be a Ticking Time Bomb

Pay off deferred-rate cards before the low rate expires.

Time bomb with credit card isolated on orange background. 3d illustration
(Image credit: Getty Images/iStockphoto)

If you opened a retail credit card with a deferred-interest plan to save on your holiday shopping, be sure to pay down your balance well before the no-interest term expires. Otherwise, you’ll start 2019 in a world of hurt.

Retail credit cards that entice shoppers with these promotions often bury the catch in fine print: If any amount remains after the deferred-interest period expires—which can be in as little as six months—or you are more than 60 days late in making a minimum payment before the period ends, you can be charged interest retroactively on the purchase price. On top of that, the average rate on retail cards is almost five percentage points higher than average overall credit card rates, reports (opens in new tab).

If you overspent on your regular credit card and are racking up interest charges, one strategy is to transfer your balance to a new card that charges no interest on transfers for a set period of time. For the next holiday season, consider using a general-purpose rewards card rather than a retail card.

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Miriam Cross
Associate Editor, Kiplinger's Personal Finance
Miriam lived in Toronto, Canada, before joining Kiplinger's Personal Finance in November 2012. Prior to that, she freelanced as a fact-checker for several Canadian publications, including Reader's Digest Canada, Style at Home and Air Canada's enRoute. She received a BA from the University of Toronto with a major in English literature and completed a certificate in Magazine and Web Publishing at Ryerson University.