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If you have debt, you might be intrigued by the idea of paying no interest on your debts by transferring balances to other cards. It’s a great alternative means to debt consolidation for many Americans who do live with debt, and it’s how many families end up getting themselves out of debt for the long haul. However, it’s also a solution that’s not always helpful. You might assume when a credit card company advertises no interest on your card, you won’t pay any interest. The truth is a bit different than that assumption, and many people end up with ample debt added to the debt that already have. It comes down to how careful consumers are with their funds, how they pay off their debts, and how they’re able to get through paying off debt in the timeframe when interest is not being charged. Without your diligence, you could end up spending far more than you imagined. The biggest problem is how often consumers mistake deferred interest for 0% interest.

Deferred Interest

What is deferred interest? It’s not the same thing as 0% interest on a credit card, but many people don’t see it that way. It seems like an offer that’ll help them get out of debt faster and without as much effort, and consumers love that instantaneous concept. These cards often come from stores and from medical facilities who want you to charge your new braces or your cosmetic dentistry or your dog’s vet services. Unlike a traditional credit card that offers 0% financing for a specific time, these cards offer deferred interest rates.

You still pay interest. This is who it works. The interest is there. You can’t see it because it’s not charged to your account right away, but it’s there. You are not using a card without interest. You’re using a card where the interest is piling up where you can’t see it, and you’re just not paying it right now. You can charge $5,000 thinking you don’t have interest for as many months as the offer provided, but you do have that interest. You just don’t start paying that interest until the deferment period ends.

Here’s how this hits you. If your deferred interest card tells you that there are 12-months of deferred interest, you might assume you can charge all you want for that period of time and not pay interest so long as you pay the balance in full before the deferred interest period ends. That’s not the case. Your interest will pop up on the card when that period is over based on what kind of charges you let revolve for that time.

0% Interest

This is a bit simpler. When you apply for a major credit card with an introductory period complete with 0% APR for so many months, you don’t pay interest on anything you charge in that time unless it’s not paid off by the time your introductory period ends. If you do pay it off, you don’t incur any interest. It’s the simple way to do the debt-avoidance thing.

How to Avoid Interest All Together

Whichever card you choose, you must know how to avoid paying interest. This is not to say you should avoid either card, but you should know how to use them to help you stay out of debt and avoid interest payments.

With a deferred interest credit card, you’ll pay interest on any charges left outstanding. Let’s say you go into your favorite store and apply for the card with its deferred interest rate. Charge all you want, but be sure you pay off that balance in full each month so no interest actually accrues. You don’t see it, but you will when that introductory period ends.

With a 0% APR card, you can charge all you want during the introductory time frame as long as you pay it off before the introductory period ends. You don’t have the pay the card in full each month if you can’t afford it, because the interest only applies when you let any balance remain after the introductory rate period ends.

Now that you know the difference and how to avoid interest, it’s easier to keep your credit in check. Don’t let a card company fool you into thinking you haven’t any interest charges on your account when they defer your interest until a specific date. Pay it off monthly, because it will appear if you don’t. Your best bet is a card with a 0% APR introductory rate on purchases you need just a little more time to pay off. Keep in mind your credit score is affected by any balances you let revolve, and don’t buy anything you cannot afford to pay for as quickly as possible.