Kutay Tanir—Getty Images
By Martha C. White
December 16, 2015

Just in time for the holidays, the National Consumer Law Center just released a report on deferred-interest financing offers. The short version: They can create a huge financial headache if you’re not careful.

“Many consumers do not understand that they can be charged interest retroactively,” the consumer advocacy group said in a new report, calling deferred-interest credit card offers “a trap for the unwary.” In some cases, the minimum monthly payments aren’t enough to pay off the balance by the deadline, which the borrower might not realize until it’s too late.

The warning is a good reminder to look beneath the surface of those “0% financing” offers that proliferate at this time of year. In the fine print, these offers spell out that if you don’t pay off the entire balance of your purchase by the end of the promotional period, you’ll get socked with interest not just going forward, but for the entire promotional period since you made the purchase, as well.

The NCLC crunched the numbers and determined that a shopper who made a $2,500 purchase with one-year deferred interest and a regular interest rate of 24%, and failed to pay off just $100 of the initial balance by the end of that year, would get hit with almost $400 in interest charges. The group called on the Consumer Financial Protection Bureau to ban the practice, pointing out that the agency issued a report of its own just last week that was critical of deferred-interest promotions.

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