topic Re: What happens when deferred interest promo expires and the additional interest puts you overlimit in Credit Cards

What happens when deferred interest promo expires and the additional interest puts you overlimit?

PerArduaAdAstra — Mon, 08 Feb 2021 23:15:51 GMT

I have $600 of deferred interest coming on a card that is already almost maxed due to the pandemic. I'm guessing the card will just apply the interest and I will be over limit, but has anyone dealt with something like this before? Is it a really big deal or am I OK to just pay the newly applied interest down over a couple months to bring my card back to my regular limit and be OK?

Thank you

Re: What happens when deferred interest promo expires and the additional interest puts you overlimit

FinStar — Mon, 08 Feb 2021 23:59:02 GMT

Basically, all the accrued interest is applied on the corresponding statement whenever the promotion expires. Depending upon the type of account, there will be compounded interest on top of the additional charges made.

So, the potential impacts are a maxed out card reported to the CRAs + additional finance charges at an astronomical rate. Hopefully the lender doesn't CLD!

Re: What happens when deferred interest promo expires and the additional interest puts you overlimit

zerofire — Tue, 09 Feb 2021 04:20:39 GMT

It depends on how the card is structured. Nasty lenders will hold off the interest until your promo expires and then add everything since the day it was charged so to get any use out of it you have to pay off the principal. Nicer lenders set the interest rate at 0% and start adding interest only once the promo expires. The former is usually what Synchrony does and the later is more Chase and US Bank style. Regardless you want to pay off as fast as possible. Most cards will not apply the credit limit for bank fees so when your first generate a statement you will owe minimum payment and everything over the limit by the due date. This is on top of reporting really badly as over the limit on your report. Failing to pay by the due date everything owed will usually shut down your account but they might consider adding 30, 60 or 90 day lates first. It will not end pretty.

Re: What happens when deferred interest promo expires and the additional interest puts you overlimit

hdporter — Tue, 09 Feb 2021 04:37:11 GMT

@zerofire wrote:
It depends on how the card is structured. Nasty lenders will hold off the interest until your promo expires and then add everything since the day it was charged so to get any use out of it you have to pay off the principal. Nicer lenders set the interest rate at 0% and start adding interest only once the promo expires.

"Nasty/Naughty and Nice" is a functional way to describe Santa's list; not such a productive way to evaluate lender policies.

Both policies with respect to promotional interest terms are legitimate and can be advantageous finance schemes for a borrower. The onus is on the borrower to understand the rules that apply and manage the account balance accordingly.

In the case of the account detailed by the poster, there's no question that finance charges accrue during the promotional period at the standard rate of interest but the posting of them is deferred and will only occur if the account hasn't been brought to a 0 balance in advance of the promotion end date.

Going back to the original post, as has separately been noted, after the deferred interest posts, your account will be overlimit. This will depress your credit scores. Your credit scores begin taking a modest hit whenever your utilization on an exceeds 50%, and a greater hit at 70% or higher. As you pay down the account, that credit score hit will reverse.

It will be to your advantage to at least pay down the account balance to the credit limit as quickly as possible. Reporting a balancre in excess of your credit limit signals to other creditors that you're having trouble paying your debts as agreed. This may make it difficult to seek new credit, and existing creditors may be prompted to reduce the limits you have with them.

Re: What happens when deferred interest promo expires and the additional interest puts you overlimit

Remedios — Tue, 09 Feb 2021 05:03:46 GMT

@zerofire wrote:
It depends on how the card is structured. Nasty lenders will hold off the interest until your promo expires and then add everything since the day it was charged so to get any use out of it you have to pay off the principal. Nicer lenders set the interest rate at 0% and start adding interest only once the promo expires. The former is usually what Synchrony does and the later is more Chase and US Bank style. Regardless you want to pay off as fast as possible. Most cards will not apply the credit limit for bank fees so when your first generate a statement you will owe minimum payment and everything over the limit by the due date. This is on top of reporting really badly as over the limit on your report. Failing to pay by the due date everything owed will usually shut down your account but they might consider adding 30, 60 or 90 day lates first. It will not end pretty.

Nah.

Your "nasty" lenders simply offer deferred interest as in "here is two years to pay for your bookcase. If you ain't done paying, interest is calculated from the day 1"

This isn't a small print, it's splattered and clearly stated all over, these offers typically have very generous payoff timeline, which makes them appealing to many, and works like a charm for those who have discipline over their finances and know what they can afford.

It's up to a consumer to decide if paying $35 per month on something that's $3500.00 for two years is a wise choice.

Consumer is in control of payments, and lender isn't "nasty" because an individual didn't do what's right for them.

I have never heard of lender reporting a late just because principal balance wasn't paid, and frankly, I'd love to find out where someone said that was the reason they got 30 (or longer) day late

They don't "push" us over the limit, we do that ourselves.

Re: What happens when deferred interest promo expires and the additional interest puts you overlimit

Shooting-For-800 — Tue, 09 Feb 2021 12:36:22 GMT

Store card or bank card?

Bank cards generally do NOT accrue interest...

Re: What happens when deferred interest promo expires and the additional interest puts you overlimit

Anonymous — Tue, 09 Feb 2021 22:07:24 GMT

You won't be forced to pay the entire principal balance to avoid a late. Just the minimum due however it's calculated (which is probably the usual minimum due plus any amount over the limit plus any past due amount).

However, any balance you don't pay off right way will continue to accrue interest, so it's in your best interest to pay it off as quickly as possible.