7 On Your Side
Consumer Reports examines deferred-interest cards
Credit cards that allow you to defer the interest on your purchases seem like a great idea, but they can actually end up costing you big time down the road. Consumer Reports has partnered exclusively with 7 On Your Side to find out just how expensive these cards can get.
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.
"They added $1,300 in interest on a balance of roughly $700 or $800," said Watts.
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.
"The disclosures on these cards are really not enough to help consumers understand what they're actually buying," said Christine Tetreault, Consumers Union.
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.
"The very location of the solicitation within a doctor's or a veterinarian's office or a dentist's office is inherently exploitative," said Tetreault.
Consumers Union, the advocacy arm of Consumer Reports, says deferred-interest cards, while legal, are dangerous financial products and often carry high interest rates.
"They should be banned," said Tetreault.
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.
Consumer Reports is published by Consumers Union. Both Consumer Reports and Consumers Union are not-for-profit organizations that accept no advertising. Neither has any commercial relationship with any advertiser or sponsor on this site.
(All Consumer Reports Material Copyright 2010. Consumers Union of U.S. Inc. ALL RIGHTS RESERVED.)
consumer reports, credit cards, 7 on your side, michael finney
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