No Payment Credit Card Plans: Understand The Fine Print

The lure of a no payment credit card can be quite strong, particularly if you have a specific item that you want to purchase with a new line of credit. While it can be very tempting to take out a credit card that requires no payments for the first few months, there can be very definite disadvantages if you are not aware of what you are agreeing to with this type of credit card.

No Payment Plans

No payment credit card plans are also called deferred payment credit cards. Usually these credit cards are offered as an introductory plan for individuals opening a new line of credit with a specific credit card company. Generally, deferred payment lines of credit are only available for individuals with near perfect credit.

The other type of deferred payment credit lines are those that are offered as a promotional credit program for existing customers. Many companies offer deferred payment promotional programs as a way to encourage customers to increase purchases, particularly during times of low customer purchases or during times when customers are more likely to make more purchases, like year-end holidays.

Some credit card companies offer deferred payment promotions on specific types of purchases, like furniture, website purchases or airline or travel expenses. Very often, deferred payment promotional programs are offered for a limited period of time.

Payment Terms

While the initial payment deferment is for charges that are incurred for purchases made during the deferment period – anywhere from a few months (90 to 120 days) to a year – in most cases, there comes a time when payment is expected from the credit card company. Usually, payment of the entire balance is expected in full when the deferment period ends. A finance charge is usually also added to any balance when the promotional period ends. However, usually any finance charges can be avoided if the balance is paid in full before the end of the deferment period.

If a deferment period is offered for an existing credit card account, then most credit card companies expect continued payments on existing balances and the deferment period only applies to new purchases incurred during the deferment period. Usually, the deferment promotion will be terminated and ended if a required payment on an existing balance is missed, a payment is not honored or the credit limit is exceeded. Also, any charges for late payments are usually applied to the entire balance due, not just the existing balance incurred outside of the deferment promotion.

Minimum Purchases

In some cases, the credit card company offering a deferred payment period may require a minimum purchase amount. This amount can vary from card to card and may be the entire added balance of purchases during the deferment period or a per purchase minimum requirement.

Summary

While deferred or no payment credit card promotions can be extremely tempting, it is important to understand the exact terms of the promotional program before racking up a large balance. In many cases, deferred payment programs are time limited and have very specific payment requirements that apply not only to the balance resulting from purchases made during the promotional period, but also to existing balances.

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