This time of year, you can hardly stroll past a store or log onto a retailer’s website without getting bombarded with offers for special financing via that merchant’s proprietary credit card. Many of them tout no-interest financing for a year, two years — sometimes even longer. But not all of these deals are created equal. All come with fine print; namely, if you don’t pay off everything by the time that promo period expires, you’ll get socked with back interest for the entire term. The devil is in the details. Some offers come with sky-high interest rates and possibly even more fees. Some deals bury these important facts in the fine print. Others pitch ancillary products like credit protection that many mainstream cards have dropped in the face of disciplinary action from financial regulators.
Credit experts flag the following offers as ones to be wary of this holiday season.
Amazon.com came in second-to-last on CardHub.com‘s recent ranking of retailer financing transparency. Although it touts interest-free financing for six, 12 and 24 months for different promotions on its store card in big blue print on its site, it’s a little harder to find out that cardholders will be paying nearly 26% in interest after the teaser ends. CardHub says Amazon’s poor score is because of “the small print in which information was disclosed and it being burried in text.” For all three offers, that very important number is lurking just a few lines from the bottom of a long paragraph of information.
Best Buy has several financing offers, but only when you dig into the fine print does a customer discover that the most generous offer — a four-year payment term — isn’t at 0%. “Best Buy’s cards have an astronomical APR, but tout ‘financing offers’ for purchases totaling various amounts. However, that financing offer is at 11.90%–not the 0% intro you would expect,” warns Amber Stubbs, managing editor of CardRatings.com. Promotions with shorter terms — the electronics chain’s site hawks six, 12- and 24-month teaser periods for different programs — are at 0%, but then the APR zooms up 25.24% or 27.99% depending on the cardholder’s credit.
Lowe’s tied with Amazon in CardHub’s ranking of 0% offers. Although customers get six months to pay off their purchase of more than $299, the standard APR of 24.99% is buried just a few lines from the bottom of the webpage. And there’s another issue: When a user clicks on the application, they have to wade through a long pitch for “optional card security” that promises “up to $10,000 in protection” and “peace of mind.” Consumer advocates have warned for years that so-called credit protection is basically useless and the Consumer Financial Protection Bureau has started taking action against some credit card companies over how they market and sell these products; in an October report, the agency said “will continueto closely review the sale of add-on products by card issuers and their service providers to determine whether additional consumer protections are warranted.”
Radio Shack offers 0% interest for six months if customers spend $150 or more. After that teaser, though, the regular interest rate is “astronomical,” according to Bill Hardekopf, CEO of LowCards.com. Although most store credit cards tend to have high interest rates, this is one of the highest non-penalty APRs out there, and it kicks in after just six months. Even if you have good credit, you’re looking at 26.99%; lower credit scores get 28.99%.