Many shoppers can save money in the long run by avoiding zero-percent, "no-interest-now" deals during the busy holiday season. Odysseas Papadimitriou, founder and CEO of the personal finance websites CardHub and WalletHub, notes that deferred-interest-rate deals are an extremely popular offering right now. Consumer watchdogs, however, warn that there are many ways for shoppers to end up paying more than what they anticipated under these deals.
About 43 percent of borrowers with subprime credit scores who participated in a deferred-interest program failed to repay their total balance before interest kicked in, according to an October report by the Consumer Financial Protection Bureau. For spenders who are careful with due dates and who could pay cash on the spot anyway, this type of deal can work in their favor; but others may intend to pay off a bill in 12 or 18 months, only to be late mailing in a monthly payment or run into an unexpected financial emergency that derails their payment strategy. About 12 percent of consumers with prime credit did not pay off a balance in full, triggering interest charges with those deferred-interest programs, the CFPB said.
Some consumer advocates are calling for a ban on deferred-interest plans, calling them one of the worst traps that remain even after the Credit Card Accountability Responsibility and Disclosure Act of 2009 removed other abusive practices with credit cards. CardHub conducted a deferred-interest survey of some offers, finding that not all companies are transparent about their terms and policies.