credit & debt

Don't Be Burned by Deferred Interest

You'll feel the pain if you fail to pay off your store card before the 0% period ends.

If you nabbed a deferred-interest financing deal while shopping for the holidays, be prepared to pay the bill in full before your free ride comes to an end. Such promotions, which retailers offer through store credit cards or financing plans, typically provide a period of six to 24 months or longer during which the balance incurs no interest. But there's a catch: If you leave any portion unpaid after the grace period expires, you'll be hit with retroactive interest charges on the original purchase amount. And the standard rates are usually steep, to the tune of about 25% or more.

To avoid forking over interest, divide the balance by the number of months that you have to retire it interest-free, then set up monthly automatic payments for that amount, suggests Nick Clements, cofounder of MagnifyMoney.com.

You might need a backup plan. If you won't be able to meet the deadline that a store credit card imposes, consider transferring the balance to a traditional bank credit card with a 0% introductory rate, such as Chase Slate (0% for 15 months, then 13.24% to 23.24%; there is no balance-transfer fee if you transfer the debt within 60 days of opening the card). At the end of the no-interest period, bank cards charge the standard rate only on the amount you still owe.

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