Consumers love to utilize promotional financing in order to facilitate larger purchases. In most cases, the 0% introductory rate on purchases applies for the duration of the promotion, and then the remaining balance is subjected to the standard interest rate. Yet in some cases, in-store promotions have terms that specify that the standard APR is applied to the entire purchase price if it is not paid in full by the end of the promotional period. In these circumstances, consumers can use a balance transfer in order to avoid accruing a lump sum of interest charges.
In-store promotional interest rates
One of the credit cards that feature such ‘all or nothing’ terms is from the Lowe’s chain of home improvement stores. Its terms specify “No interest if paid in full within 6 months. Offer applies to single-receipt purchases of $299 or more made on your Lowe’s® Consumer Credit Card. Interest will be charged to your account from the purchase date if the promotional purchase is not paid in full within 6 months.”
For example, if a cardholder charged $1,000 during the promotional period, that entire amount would be subject to their standard interest rate of 24.99% if not paid in full within six months, which could total $125. Similar offers are often seen at furniture stores, pool and spa dealers, and other retailers that offer big-ticket luxury goods. These offers feature slogans such as “six months, same as cash!” As always, the key is to closely scrutinize the fine print in order to determine if interest applies to the entire balance if not paid in full by the end of the promotional period.
Utilizing a promotional balance transfer
If, prior to the expiration of the promotional interest rate, a customer who will not be able to repay the balance in full opened a 0% APR balance transfer card, that entire expense could be avoided. Currently, the Slate card from Chase offers 15 months of interest free financing on both new purchases and balance transfers without any fees. The Citi Diamond Preferred card offers similar terms for 18 months with no annual fee, although it does have a 3% balance transfer fee. Even with the 3% balance transfer fee, the cardholder would only incur $60 in fees on the $1,000 balance, but save up to $125 in interest at 24.99%. The net savings in this case would be $65.
By carefully reading the terms and conditions of in-store promotional financing offers, and by utilizing 0% balance transfer offers when necessary, customers can avoid unnecessarily incurring massive interest payments.