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Just What Is Deferred Interest on a Credit Card?

A deferred interest rate deal involves you paying less interest (usually for a set amount of time) than what is usually charged. For example, if you were to buy a television set in a store, and the terms said, “no interest for 12 months,” it means you get the opportunity of not paying the interest on that television set for the first 12 months.

However, there is a catch. You must pay off the initial amount of money you borrowed. If you can’t pay the entire balance off in time, then you’re on the hook for the entire interest bill on the initial purchase amount. Therefore, once the 12 months are over, you have to start paying all of the interest on the television set if you are still paying it off.

Where Is Deferred Interest Used?

Usually deferred interest is offered or provided for expensive items that you need or want. This could be furniture, motor cars, jewelry, etc. When it comes to holidays, many retailers will entice people with their “buy now, pay later” promotions. Credit cards and online retailers also have these kinds of offers.

Consumers sometimes think that offers like this sound too good to be true. With the holiday season upon us, some retailers are beginning to focus on selling their more expensive, high-end goods to customers, and to do so, they have created credit offers that may persuade customers to make bigger purchases. Offers may come your way with promises of no interest payments for months or even years.

For many consumers, this is exceptionally appealing especially when they were already planning on or hoping to be able to make big purchases. If you don’t have the money or the savings, it’s at times like these that retailers “trap” customers, allowing them to purchase liberally, spreading their payments over time, and excluding interest.

Downside of Deferred Interest Plans

The interest doesn’t just disappear if the consumer can’t pay off the initial purchase in the deferral period. If there remains a balance, the consumer will owe the full interest from the date of purchase on the original purchase price.

Amazon, for example, is the world’s leading online digital retailer. They sell everything from coffee tables to garden hoses to drones. On some purchases, they offer a six-month deferred interest plan. They have the typical terms. Users pay no interest if their balance is paid within six months. Those who can’t or don’t pay their balance in full by the end of the deferral period will have to owe interest from the date they purchased the item over the full term of the loan. Additionally, an annual percentage rate (APR) of 25.99% is applicable.

Many consumers believe that when they take these types of credit cards out, they will pay off their balance in the allotted time, but that’s not always the case. Retailers, experienced in the game of credit, prey on this tendency of being optimistic about paying off debt. Unfortunately, the retailers are the ones who most often benefit from these plans.

Deferred interest is still paying interest; you just don’t pay it until later. It can be useful, as long as it’s managed properly. Deferred interest should be used only if you are positive you can pay your account in full before the end of your promotional period. Deferred interest products aren’t really good deals for consumers if they don’t understand the term and then get hit with the big interest charges. The best advice is: don’t say “yes” to 0% finance in the store on a whim.

Reasons Why People Don’t Save Money

According to an official study, 57 percent of Americans have less than $1,000 in their savings account. Additionally, 39 percent of Americans don’t have any savings at all. Evidently, these statistics are a tad troubling, considering that having a savings account is essential. It helps when it comes to unanticipated expenses and emergencies.

What are the five most common reasons why some people find it so difficult to save money? Let’s find out!

Surprise Medical Bills

There are times when you have health problems; hence, you have to deal with unexpected medical bills that can be quite pricey. It all depends on your insurance coverage. Health problems can have many causes; however, when they occur, you need to address them right away. And in order to do that, you need financial resources.

That’s why having a savings account could actually help. If you don’t have that in case of emergencies, you’ll need to apply for a loan, which will increase the amount of debt you owe. In fact, up to 27 million Americans use credit cards to cover their medical bills; this costs them no less than $471 in interest a year.

Too Much Debt

Another top reason why many people find it impossible to put money aside is the amount of debt they have. For instance, the Americans’ total credit card debt has increased in 2017 with approximately 8 percent, reaching $905 billion.

Apparently, credit card debt is the most serious concern, followed by residential mortgages, personal lines of credit, household debt, student loans, and the list may go on.

When you’re in such profound debt, managing to save money seems to be an unattainable purpose, making it difficult to cope with everything that comes your way.

Truth be told, the costs of being in debt are excruciatingly high. In fact, most people who had considerable credit card debt outlined that if they didn’t have to pay that debt off, they would have managed to save money for emergencies or to pay down other debt.

High Living Costs

According to official information, living costs have increased. Over the past decade, food prices have grown by 22 percent, whereas medical expenses have increased by 34 percent. While the incomes have registered a consistent growth, as well, four spending categories have experienced an unprecedented increase, namely medical expenses, food and beverages, other expenses and housing.

If we consider the high costs associated with living in certain areas, it can be rather challenging for people to make a living without being in debt, let alone manage to save money.

Having a Consumption Attitude

While the aspects mentioned beforehand are worth taking into account, they aren’t the only reasons why many Americans don’t have a savings account. Many people consider that the high living costs determine them to accumulate debt. Other “culprits” could be the bouts of unemployment.

Surprisingly, though, a survey outlines that 41 percent of people spend more than they can afford on things they don’t necessarily need.

Oddly enough, the reasons we listed beforehand come afterward. To be frank, we live in a society that encourages reckless spending. We don’t think of the consequences of our financial decisions, and we end up spending money we don’t have. So, the fact that we live in a consumption society may also prevent people from saving money.

No Spending Budget

When you don’t have a spending budget, you are imminently tempted to spend on this and that, without necessarily needing anything. A realistic budget can help anyone to manage their finances; it’s useful even if you’re dealing with serious debt. That can help you realize where your money is going to. It forces you to face your fears and acknowledge that you need to change your spending habits.

Should People Save More Money Than They Do

The evident answer to this question is yes. Alternatively, some people might stop saving to focus on paying down their outstanding debt – which could be an efficient strategy, as long as you have a goal set in mind.

As a result, it’s up to you to analyze your financial situation, prioritize and take the steps you should in order to attain financial stability. Take small steps, and try to free up money that you can use for debt payments or save for unanticipated events.

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