Oct. 20--The holidays might be a tempting time to pile on debt, but shoppers should be particularly wary of "deferred interest" plans offered by retailers, according to a study released Tuesday.
CardHub.com said deferred interest plans are typically marketed as charging 0 percent initially, but they come with a catch that distinguishes them from typical credit cards with introductory rates of 0 percent.
In the deferred interest plans, if you leave an unpaid balance of even $1 at the end of the introductory period, or if you miss a single payment, interest retroactively applies to the entire original purchase amount, CardHub.com said.
In contrast, most 0 percent credit cards will assess interest only on whatever balance remains when the introductory term ends.
CardHub, in its report, found that nearly three-fourths of major retailers offer financing options to shoppers.
Of those, nearly half offer a deferred interest plan.
They include Apple.
Apple's website provides a link to a Barclaycard Visa with Apple Rewards. "If you pay off the entire purchase balance before the end of the promotional period (and all monthly payments are made on time), you will not pay the accrued interest," the Barclaycard Visa with Apple Rewards page says. "If you do not pay off your entire purchase balance by the end of the promotional period, or you are late with a payment, you will be billed all of the deferred interest that has accrued from the original purchase date."
Other major retailers that offer deferred interest include Amazon and Lowe's, among others.
Retailers deemed "nice" by CardHub.com for not offering deferred interest include Target, Sports Authority, Neiman Marcus, Costco, Nordstrom, Williams-Sonoma, Kohl's, Ace Hardware, BJ's Wholesale, Dillard's, Barnes Noble, QVC, Belk and Gap.
byerak@tribpub.com
