Question of the Day: You purchase a new TV with a store card offering 0% APR (pay no interest) for 18 months. What happens if you don't pay in full within 18 months?

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Nov 18, 2020
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Question of the Day, Credit Cards, Research

Answer: 53% of store cards have deferred interest features meaning you will pay interest going back to the date of the purchase which can be quite costly.  

Questions:

  • Black Friday is right around the corner..why do you think these 0% APR offers are so popular at this time of the year? 
  • How often do you think consumers forget to pay off the full balance and get hit with these deferred interest surprises? 
  • Do you think offers like are a good idea for consumers? Why or why not? 

Here's the ready-to-go slides for this Question of the Day that you can use in your classroom.

Behind the numbers

From CFPB

Deferred interest means that if you do not pay off the entire balance of the promotional purchase you’ve made on your card, then interest going back to the date of the purchase will be added on top of the remaining balance. This promotion may also require you to meet other terms as well, such as m

From WalletHub Survey

Deferred interest means you pay no interest or a reduced rate for a period of time, but allows for the possibility that a high regular APR could retroactively apply to your entire original purchase amount – as if the low intro rate never existed. Paying one month’s bill a day late or owing even $1 when the promotional period ends could trigger the deferred interest clause, activating high interest charges. Deferred interest is common with 0% store financing offers. And since many retailers don’t disclose deferred interest clearly enough, it can lead to some expensive post-holiday shopping season surprises.

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About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.