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17 retailers whose holiday payment plans could prove costly to consumers
536e24fb68f1f2449af26b28be41896e513923d9f2bed451654b5d924568d20a calls deferred interest "a wolf in sheep's clothing." Here's what it is and the retailers who offer deferred in payment plans for the holiday season. - photo by Payton Davis
A new study released Tuesday indicated the Grinch has nothing on deferred interest when it comes to putting a damper on the holidays.

Deferred interest financing "is like a wolf in sheep's clothing," according to Typically, retailers advertise these payment plans as charging 0 percent interest.

But miss a payment or leave an unpaid balance on a deferred interest plan and those holiday deals won't mean much in retrospect, Beth Braverman wrote for The Fiscal Times.

"Heres where the fine print comes in: If you leave an unpaid balance of as little as $1 at the end of the introductory period, or if you miss a single payment, the interest will retroactively apply to the entire original purchase amount," Braverman wrote.

CardHub reported that's the difference between paying $2 in interest on a normal credit card and $55 with a deferred credit card if a consumer spent $800 and tried to repay the amount in six months but took seven instead. With the perils of these plans in mind, CardHub evaluated 49 large retailers' financing options to identify which ones offer deferred interest and, if so, how transparent their websites are in keeping buyers informed about such plans.

Becky Yerak of the Chicago Tribune noted shoppers might be wary of Apple, Amazon and Lowe's among others if they wish to avoid deferred interest.

However, CardHub deemed Target, Sports Authority, Costco, Barnes & Noble and QVC, notably, as "nice" for not offering the plans to consumers, Yerak wrote.

Of retailers that offer deferred interest, CardHub rated each on a transparency scale of one through 10, 10 being most transparent. The retailers received ratings based on how easily shoppers could find the plan's terms and understand them, CardHub's report indicated.

Jeff Jones, Missouri State University assistant professor, told CardHub that consumers with strong knowledge of finance can make deferred interest work well for them; otherwise, said payment options prove "problematic."

"For someone who is financially savvy, deferred interest financing arrangements can be beneficial, essentially providing an 'interest-free' loan," Jones told CardHub. "For those who are less financially savvy, deferred interest loans can be problematic, particularly when the credit terms are not explicitly explained to the buyer. Even if they are fully explained, sometimes they are misunderstood by the consumer, which can result in large and unexpected interest charges down the road."
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