0% Rate Retail Credit Cards

As a homeowner, I get a lot of junk mail. In particular, I get lots of offers for 0% financing for major appliances and big ticket items. The Home Depot and Best Buy are probably the largest contributors.

On the surface 90-180 days of 0% APR sounds great. If you read our prior article, you could put the major purchase in a short term money market account and make 2-4% interest for the 90-180 days and get a small bonus for your purchase.

The problem is that most consumers don’t use this approach. They fail to read the fine print. Take a look at the excerpt from The Home Depot Credit Card disclosure below:

“No Interest. No finance charges will be imposed on this balance if you pay the amount of the balance in full within the promotional period. If you do not pay the balance in full prior to the expiration of the promotional period or if the promotional offer is otherwise terminated, finance charges on this balance will be imposed from the date of purchase until the balance is paid in full.”

This means that if you don’t pay the balance in full by the time the promo period ends, you will accrue interest from day one. This is often the rub of these type of offers. The truth is that a majority of the consumers will not pay off the balance in full within the 90-180 days. This leave the consumer paying 20-24.8% interest from day one.

From the retailer’s perspective, this is great. The consumers buys major appliances with a nice margin. Then the retailer get the consumer to pay for extremely high interest for months to come.

As a savvy consumer, you should always be aware of the fine print. As a rule of thumb, retail credit cards will have a higher APR than that of standard credit cards. I would recommend only using retail cards in two scenarios.

1. You understand the fine print and are taking advantage of the same as cash benefits. Sometimes these credit cards will get you another 10-20% off the initial purchase.
2. Retailer cards will have smaller limits and less stringent underwriting guidelines. This means if you have no credit history this may be a good place to start building one. With that said, plenty of major banks will give you a small credit line too if you are just starting to build a credit history.

Most times you will do better getting a 0% rate from a major issuer since their products don’t accrue from day one. There are some pitfalls with those offers too. I’ll discuss that next time.