HOUSTON - The National Retail Federation expects consumers will be spending less, this holiday season.
As shoppers look to stretch their spending power, a new survey shows one type of purchase could be more expensive than expected.
While consumers have, generally, been using their credit cards less, and paying down balances during the pandemic, they may be inclined to make a big purchase, for the holidays.
Retailers are ready, with some offering a big, splashy zero-interest deal to help make that happen.
It can be a helpful deal unless you don't pay it off on time. "A lot of people, six, nine months later are then stuck with this huge bill that they didn't realize they were signing up for," says WalletHub's Jill Gonzalez.
The personal finance website just released a new survey on deferred-interest purchases. That's where retailers offer zero-percent financing on big-ticket items, giving consumers a set period of time to pay off the debt.
The WalletHub survey finds 52% of consumers don't know what they're getting into. "Say you buy an $800 dollar TV," explains Gonzalez, "You've paid it all off, except for $20 dollars.
Instead of being charged interest on that $20 dollars, in the 7th month, the interest has been deferred. So, you're actually paying interest on the entire $800 dollar purchase."
It can be jarring, but the details are in the fine print, which is the consumer's responsibility to know. Typically, if payments are late or not completed by the end of the introductory period, then that deferred interest gets tacked on from the purchase date, at rates that can approach 30 percent.
WalletHub warns consumers to know, before they buy. "A lot of us are going to be doing the majority of our shopping at home, this year; online; you've got all the time in the world, says Gonzalez, "Now is the time to really take your time, read the fine print and know exactly what you're signing up for."
Interest-deferred deals are designed to look enticing, and they're designed to move merchandise.
They're also perfectly legal. Consumers choosing to make such a purchase need to be sure they can make all the payments, on time, before the introductory period ends. They won't get any wiggle-room if they don't.