Be cautious with offers of “zero interest” on store credit cards this Black Friday


(WFXR) — The temptation of so many months interest free may lure you to a store this Black Friday, but make sure you read the fine print. Otherwise, you may be surprised by a hefty interest charge the day after the interest rate promotion ends, one website says.

The holiday shopping season is upon us and the deals are expected to roll out on Thanksgiving Day and Black Friday, two days known for bargain hunting crowds.

If you are enticed by “zero interest” for a specified period on a store credit card, be sure to read the fine print. These offers may actually be “deferred interest” which will charge you the full accumulated interest for the promotional period if the purchase is not paid off before the last day of the promotion. Personal finance website Wallet Hub says such promotions are “like a wolf in a sheep’s clothing.”

Dr. Dave Brat, dean of Liberty University School of Business, said consumers should be very careful with such offers.

“If you’re the type of person that just hates getting a bill in the mail, and the surprise and having to call 800 numbers for a half hour, I would stay away,” he said, adding that holiday shopping should be done with cash.

“I wouldn’t do it unless you absolutely have to. It’s not worth the pain you’re going to endure later on.”

A study by Wallet Hub showed 82 percent of those surveyed do not know how deferred interest works yet 59 percent are drawn to 0% financing offers.

“Suppose, for example, you’re interested in opening a new credit card account to finance a couple of big-ticket items from your child’s Christmas list. And let’s say they cost a total of $800, an amount you think you can repay within six months in the absence of interest,” the website reports. “But things happen, and it ends up taking you seven months instead. With a normal 0% credit card, you’d end up paying about $2 in interest (assuming a 20% regular APR) because interest would apply only to the balance remaining at the intro term’s conclusion. But with a deferred-interest credit card, you’d be on the hook for roughly 27.5 times that amount (i.e., $55 in interest).”

Wallet Hub said retailers which offer deferred interest include Lowe’s, JCPenney, The Home Depot, Best Buy, and Big Lots.

“These are firms you know that have these credit departments on the side that send collectors after you if you don’t pay [your bill],” Brat said.

Read more about deferred financing at Watch the complete interview with Liberty’s David Brat above this story.


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