Deferred Interest Credit Card

Submitted by JungleCrab t3_1258r9b in personalfinance

I recently got LASIK done on my eyes and applied for a deferred interest credit card to pay for it. The card promised 0% interest for 12 months. My understanding was that as long as the card was paid off in full before 12 months then I would be fine. I got an email today saying that I need to make a minimum monthly payment. Does anyone know if it is required to pay off a portion every month instead of just paying in one lump some on say month 11? I have never had one of these cards before so I am not really sure how they work as far as payments go.

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crowd79 t1_je31r6b wrote

You still have to make the minimum monthly payment each month. Typically it is 1% of the card balance or so. When month 11 comes, you pay off the remainder of the balance in full to avoid interest.

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wanttostayhidden t1_je31tyx wrote

I have never seen a deferred interest promo that didn't require minimum monthly payments. Also, be aware that the minimum payments are usually set too low to pay it off in time. Make sure you pay the full amount before the end of the promo so you don't get hit with all the back interest.

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JungleCrab OP t1_je3313o wrote

Thank you everyone for informing me! I wasn't sure since this is my first no interest type card. I will make sure to pay the minimum and to pay off the rest before 12 months.

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babarock t1_je34b18 wrote

Divide the balance by 11 and pay that. You usually want it paid in full before the term is up. Many times if not you get hit with all the interest.

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crowd79 t1_je4f4ht wrote

If OP is extremely disciplined this isn't totally necessary. I'd pay it off slowly (min payments only) and park the excess in a high-yield savings account in the meantime paying 4-5% interest.

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babarock t1_je4qexv wrote

Are you suggesting OP spread the repayment over several years by only making minimum payments? If yes, wouldn't the much higher interest charged on the credit card evaporate the 4-5% you could make via the HYSA.

If you have the cash, put it in a HYSA then make large enough payments to pay off the debt before the deferred interest is added back to the balance. That way you make a few $ and pay zero $ in interest.

If you can only afford to make minimum payments then the deferred interest card ends up being different that a regular credit card regarding how much the borrowed money cost. I've done these loans a couple of times with Home Depot and a HVAC replacement. The interest is delayed for a period of time but not forgiven unless paid in full before the time is up thus I would divide the balance by the time factor so being extremely disciplined with the payments, the debt would be gone before any interest would be charged. I got to use their money to fund a project.

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nkyguy1988 t1_je31jhu wrote

You still have a minimum monthly payment. That is standard. Whether or not those payments will pay it off in full is up to how the minimum is structured. A balloon payment at the end may be needed

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Rave-Unicorn-Votive t1_je31xd8 wrote

Nearly all forms of credit will require a minimum monthly payment. Deferred interest ≠ deferred payment.

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lilfunky1 t1_je32q4g wrote

There is always a monthly minimum payment.

Failure to pay this minimum amount on time every month will likely cancel the promotional deferred interest and you'll immediately start getting charged interest and/or even be charged retroactive interest

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BastidChimp t1_je3elm1 wrote

Just pay it off asap. Once you have ended your debt your options will open up immediately to save and invest more aggressively for other endeavors. A mortgage is the only debt you should ever have to carry. Every other consumer debt is dead weight.

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