Deferred-Interest Gotchas

Buy now, pay later offers on big purchases sound great. You can often get on-the-spot approval for a loan you might not have to pay off for years.

But Consumer Reports says beware. Miss a bill deadline by just one day or carry a balance past the no-interest promotion period, and you could get slammed with mountains of interest.

Doug Watts says buying his televisions with a deferred-interest credit card from Best Buy was one of the dumbest moves he ever made.

A nasty surprise came in the mail, when the three-year promotional period was up.

Watts says, “They added 1,300 dollars in interest on a balance of roughly 7 or 800 dollars.”

The original receipt Watts signed contained loan terms he says were hard to find and unclear. But they said if he didn’t pay everything off in three years, he’d be charged interest on the entire bill — even on the money he’d already paid.

Attorney and financial expert Christina Tetreault says although the terms of deferred-interest cards have recently gotten clearer, you can still get trapped.

Tetreault says, “The disclosures on these cards are really not enough to help consumers understand what they’re actually buying.”

Besides Best Buy — Home Depot, Walmart, and other retailers promote deferred-interest loans.

You’ll also find solicitations for deferred-interest credit cards designed for health care expenses in doctors’ offices, a setting where people struggling to pay for care could be most vulnerable.

Tetreault says, “The very location of the solicitation within a doctor’s or a veterinarian’s office or a dentist’s office is inherently exploitative.”

Consumers Union, the advocacy arm of Consumer Reports, says deferred-interest cards, while legal, are dangerous financial products and often carry high interest rates.

Tetreault says, “They should be banned.”

As for Doug Watts? He says he’ll never fall for another
deferred-interest credit pitch again.

Consumers Union and other consumer groups have asked the new federal financial watchdog board to look into deferred-interest credit cards. And the Consumer Financial Protection Board says it will.

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