Getting a Store Credit Card? Beware Deferred Interest

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An interest rate that suddenly applies to the entire balance, including what you already paid back? Who does that? As it turns out, some of the largest retailers in America.

It sure would be handy to have a credit card that would allow you to defer both payments and interest until after the holidays.

Turns out, there are.

A lot of retailers offer such cards, CNNMoney says. They come with a zero percent introductory interest rate, giving you longer to pay back the balance without owing any more than you spent.

A great feature, if you have the money to pay the card off when the zero interest expires and the balance comes due. Otherwise, however, the offer can be a sort of Faustian bargain.

As it turns out, with some cards, if you’re even a dollar short of full payment by the time the introductory period ends, you’ll be hit with what’s called deferred interest. Out of nowhere — or at least out of the confusing fine print you didn’t read — pops a huge interest rate that applies to the full original balance, regardless of how much you’ve paid back or when.

The average interest rate among 50 of the largest retailers’ cards is 25 percent, according to a CardHub.com analysis cited by CNNMoney.  More than 40 percent of the retailers that offer cards use a deferred interest model, including these:

  • Amazon
  • Apple
  • Lowes
  • Macy’s
  • Pottery Barn
  • Walmart

Where a traditional credit card might leave you with a pittance of interest on the remaining balance, these cards could leave you owing way more than you bargained for. Only a quarter of those that charge deferred interest are very clear about the rate consumers should expect when the honeymoon period is over.

Do you use any store credit cards? Do they charge deferred interest? Comment below or on our Facebook page.

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