The Rules for an 18-Month Deferred-Interest Credit Card

Deferred interest is not interest-free, and the advertisement must make this clear. The advertisement must say that you have to pay the balance in full before the end of the period to avoid interest. Phrases like "if paid-in-full" or "same as cash" must follow any "no-interest" or "zero-interest" claim. If you don't pay in full before the period ends, you interest will be charged on the purchase price, not what's left to pay. The Federal Trade Commission suggests that the advertisement say, "Interest will be charged to your account from the purchase date if the purchase balance is not paid in full within the/by [deferred interest period/date] or if you make a late payment."

Deferred-interest cards still require you to pay a certain amount monthly toward the balance. But you can pay more than the monthly minimum to get the balance down faster. Normally, your credit card company must apply your extra payments on the balances with the highest interests. However, you can ask the company to send your extra money to the deferred-interest balance before the balances with interest; it can refuse your request if it applies extra payments on the balances with the highest rates. However, in the last two months of the "interest-free" period, your credit card company must put all payments into the deferred-interest balance. To make sure all of your eggs go to the deferred-interest basket, carry only the deferred-interest balance; avoid making other purchases for which you'll have to pay interest.

Deferred-interest plans can help you only if you pay on time each month. Your company cannot charge you interest during the 18-month period unless you are late on a payment or miss one. If you are late or miss a payment, the company can charge interest from the date of purchase. The offer must say that the company will make you pay interest from the purchase date for failing to abide by the credit card agreement. To avoid late payments, set up online or automatic payments through your bank or credit card company's site. Avoid telephone payments on the due date, because many companies will add a fee for this service.

You can buy that new washer or dryer or television with an introductory zero-interest credit card rather than a deferred-interest plan. As with deferred-interest plans, you do not pay interest during the no-interest period. However, the credit card company charges you only on the unpaid balance, not the purchase price, when the introductory period ends. The zero-interest offers often apply to purchases and balance transfers; if you cannot pay off a balance before the deferred-interest period ends, consider transferring the unpaid balance to a zero-interest credit card.