What Is a Deferred Interest Credit Card?

Deferred interest credit cards allow you to carry a balance from month-to-month, possibly without paying interest. Any balance you hold over time does accrue 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, all the interest you’ve accrued over the given time period will be added to your balance.

Deferred interest cards may have several benefits, but if you don’t know the ins and outs of how these cards work, you could end up paying a lot more in interest than you planned.

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

Using a 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’s 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 percent APR and hold that balance for two months, roughly $28.50 in interest will accrue, but you’re not technically liable for this interest just yet. You’ll only actually owe interest if you don’t pay off your balance before the 12-month deferred interest period is up.

So long as you pay off the balance within those 12 months, you would have essentially purchased 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. 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

With any credit card, if your goal is to save money, you should avoid paying interest whenever possible. This mentality is no different with a deferred interest card, though it can be a bit easier to spend beyond your means when you know that the interest being added to your account does not actually show up on your balance month-to-month.

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

Another strategy for using a deferred interest promotion card wisely is setting automated payments for at least the minimum payment due. Because many deferred interest cards cancel the deferral period if you miss payments, or don’t make the minimum payment, an innocent mistake can end up costing hundreds of dollars in interest. These penalties paired with penalty APRs will put you in an even bigger hole and could reflect on your credit report.

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 — even if you can’t afford to make a payment for the entire amount. Then, you’ll have some time to calculate the retroactive 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.

Much like deferred interest loans, or a deferred payment on a student loan, a deferred interest card is a card with a delayed interest payment. In the case of the deferred interest card, though, if you pay off the balance before the due date, you will not have to pay any interest charge that accumulates. Just remember to read the fine print with any deferred interest offer including the deferred interest financing details, payment schedules for if you do not pay off the balance by the deadline, and minimum payment requirements.

What’s the difference between deferred interest and introductory APR?

Introductory or promotional offers are different. When a credit card features an introductory or promotional period of 0 APR on purchases, no interest is charged on purchases during that period. So, when the introductory or promotional period ends, any remaining balance will begin to accrue interest from that date forward at the standard purchase APR, but there is no additional interest related to the intro/promo period.

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. Many credit card issuers 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 featuring an introductory 0% APR for a limited time is another way to make purchases without incurring interest. However, 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 note the standard purchase APR that will be applied 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.