Read the Fine Print on Zero Percent Interest Credit Cards

Promotions run all the time for zero percent interest credit cards available through local retailers.

Store credit cards can allow a consumer to make a hefty purchase that might otherwise seem beyond the person’s means.

With no interest accruing, what could it hurt?

The problem is that the interest is often accruing in the background just in case you don’t pay it off by the deadline.

CardHub studied financing options available at 49 large retailers and found differences in not only how the interest was applied, but in how well the information was provided to consumers.

What Is Deferred Interest?

Some store brand zero percent interest credit cards offer deferred interest financing.

That means the store can charge interest retroactively and have it apply to the entire purchase amount if a late payment is received or if a small unpaid balance remains when the introductory period ends.

This can be a surprise to consumers who might think the interest will only apply to the little amount they still owe at the end of the introductory deal.

CardHub found that of the 73% of major retailers who offer a financing option, 47% offer a deferred interest plan.

Of the big-name retailers, Apple, Macy’s and TrueValue were among the stores that were the least transparent about their deferred interest terms. Most transparent were JCPenney, Menard and Dell.

Zero Percent Interest Credit Cards

The lure of a zero percent interest credit card is hard for some to resist. The fact is, store credit cards are more apt to charge the interest back to the original purchase price.

For instance, if you bought an $800 sofa with a store credit card that offered 0% interest for six months, but you paid it off in seven months instead, you would end up paying $55 in interest.

With a normal credit card of around 20% APR, you would pay just about $2 in interest.

The deferred interest credit card from the store could cost you more than 27 times that of a regular credit card.

You would have to find a lot of change in those couch cushions to make up the money lost to interest. Zero percent interest credit cards lose their appeal once the special offer period ends.

Store Credit Card Disclosures

CardHub looked at the transparency of zero percent interest credit cards by analyzing the readability of the terms and the clarity of when and how the interest would be applied at the end of the promotion if the balance was not fully paid.

CardHub applied a points system to the language location and readability.

The most transparent companies stated “the standard interest rate will be applied to the balance from the purchase date” directly under the tag line of the advertising promotion, in normal 2-point font size.

The location and readability of the APR were rated in similar fashion.

Join a Free Store Debit Card and Credit Card Fees Class Action Lawsuit Investigation

Did you participate in a 0% interest promotion on a store-branded credit card and were charged an interest fee? Were you unexpectedly charged a Returned Payment Fee on a store-branded debit card? You may be eligible to join this class action lawsuit investigation into allegedly deceptive store card fees.

Join the Investigation Now