Here’s how it works: Say you make an initial purchase of $1,000 on a credit card that comes with a 25 percent interest rate after the initial deferred-interest promotional period of 12 months. At the end of that year, even if you have a small balance remaining, you will owe 25 percent interest on the full $1,000, or $250.
This is different from a zero-interest introductory period, when you would pay interest only on the balance remaining at the end of the deal.
“If you see ‘no interest’ and ‘if paid in full’ in the same sentence, that should be a red flag,” Karimzad said.
Generally, deferred-interest credit cards come with interest rates ranging from about 25 percent to 30 percent, compared with about 16 percent on general-use credit cards, according to data from CreditCards.com.