The ads are nearly inescapable. They beckon to us from everywhere; telling us that we can buy with no money down ad accruing no interest for as long as three years!
But are these retailer's credit cards really as good of a deal as they seem to be? Let's look closely at how these cards really work for consumers.
First of all, yes, it's really true that a retailer's credit card will usually give you 0% interest, no payments for two years as an example, usually for a specific type of purchase. For example, let's say you sign on for a retailer's credit card at a furniture store. Now, because you signed on for this card, you might get 10% off your purchase price, plus you get 0% down and 0% interest with no payments for the next two years.
This sounds like a great deal; however, if you can't pay off the balance on this retailer's credit card in this introductory period, then you'll be charged interest on this purchase. In fact, this interest is often retroactive and may even be compounded monthly ? this means you could end up paying far more than the purchase price for this item.
These cards should be approached with caution. If you cannot pay off the balance in full before the end of the introductory period, then you are probably better off without this card. Those retroactive interest charges could add up to quite a lot of money. Remember that these retailer's credit cards often have much higher interest rates than a regular MasterCard of Visa would.
If you're not at all sure you're going to be able to pay for the purchase in full before the introductory period ends, don't do it. Now, of course, the best scenario is not to get into debt with these types of purchases at all and instead pay cash for things you really want or need. However, if you must use credit to make this type of purchase, a better bet may be to use a lower interest rate but "generic" credit card such as Visa or MasterCard, and pay down your purchases as soon as possible. Even though you won't save a percentage of the sale price as the retailer might promise you to get you to sign up for the card (such as 10% off if you purchase with the retailer's card), you'll save money in the long run because you'll be paying lower interest rates.
If the retailer's credit card in question is from a shop where you are a regular and you know that you can afford to pay the entire balance before the end of the introductory period, then these cards can be a good deal for you. If not, then you would be well advised to avoid these retailer's credit cards. Those retroactive interest charges can really hurt you otherwise. Make sure you can afford to quickly repay the balance before you sign up for anything.
Last of all; remember that no matter what kind of credit card you use, you'll pay a lot of money in interest if you aren't careful with your purchases. Think before you buy and pay off your credit card balance as quickly as possible. You should try to never carry a balance on your credit card for more than 30 days. Credit cards can be a wonderful thing, but they have to be used responsibly.
But are these retailer's credit cards really as good of a deal as they seem to be? Let's look closely at how these cards really work for consumers.
First of all, yes, it's really true that a retailer's credit card will usually give you 0% interest, no payments for two years as an example, usually for a specific type of purchase. For example, let's say you sign on for a retailer's credit card at a furniture store. Now, because you signed on for this card, you might get 10% off your purchase price, plus you get 0% down and 0% interest with no payments for the next two years.
This sounds like a great deal; however, if you can't pay off the balance on this retailer's credit card in this introductory period, then you'll be charged interest on this purchase. In fact, this interest is often retroactive and may even be compounded monthly ? this means you could end up paying far more than the purchase price for this item.
These cards should be approached with caution. If you cannot pay off the balance in full before the end of the introductory period, then you are probably better off without this card. Those retroactive interest charges could add up to quite a lot of money. Remember that these retailer's credit cards often have much higher interest rates than a regular MasterCard of Visa would.
If you're not at all sure you're going to be able to pay for the purchase in full before the introductory period ends, don't do it. Now, of course, the best scenario is not to get into debt with these types of purchases at all and instead pay cash for things you really want or need. However, if you must use credit to make this type of purchase, a better bet may be to use a lower interest rate but "generic" credit card such as Visa or MasterCard, and pay down your purchases as soon as possible. Even though you won't save a percentage of the sale price as the retailer might promise you to get you to sign up for the card (such as 10% off if you purchase with the retailer's card), you'll save money in the long run because you'll be paying lower interest rates.
If the retailer's credit card in question is from a shop where you are a regular and you know that you can afford to pay the entire balance before the end of the introductory period, then these cards can be a good deal for you. If not, then you would be well advised to avoid these retailer's credit cards. Those retroactive interest charges can really hurt you otherwise. Make sure you can afford to quickly repay the balance before you sign up for anything.
Last of all; remember that no matter what kind of credit card you use, you'll pay a lot of money in interest if you aren't careful with your purchases. Think before you buy and pay off your credit card balance as quickly as possible. You should try to never carry a balance on your credit card for more than 30 days. Credit cards can be a wonderful thing, but they have to be used responsibly.
About the Author:
Steven J. Talrechi is a veteran on credit for 12 years. He writes about various topics on said field, including application for a credit card, and different credit card offers.
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