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Holiday Shoppers Beware: Hidden Interest Costs
29 Nov
Summary
- Half of Americans misunderstand deferred interest offers.
- Deferred interest can retroactively charge 30%+ APR.
- Zero-APR cards are a better alternative financing option.
Deferred interest financing, frequently offered by major retailers during the holidays, is drawing criticism for its potential to ensnare consumers with high retroactive interest rates. This payment plan often promises no interest for a promotional period, but failure to pay the entire balance by the deadline can result in charges of 30% APR or more, as if the promotion never existed.
Recent studies reveal that approximately half of American consumers do not fully understand these deferred interest offers, with a significant portion deeming them unfair and even advocating for their illegality. Retailers often use these plans to encourage purchases of big-ticket items, sometimes downplaying the steep interest rates in fine print.
While deferred interest can be beneficial for consumers with excellent credit and clear repayment plans, it poses a significant risk for those with lower credit scores. Financial experts now highlight zero-APR credit cards as a more straightforward and safer financing option, where interest only applies to remaining balances after the promotional period ends, without retroactive charges.
