Doug Watts says buying his televisions with a deferred-interest credit card from Best Buy was one of the dumbest moves he ever made. A nasty surprise came in the mail, when the three-year promotional period was up.
"They added $1,300 in interest on a balance of roughly $700 or $800," said Watts.
The original receipt Watts signed contained loan terms, he says, were hard to find and unclear. But, they said, if he didn't pay everything off in three years, he'd be charged interest on the entire bill, even on the money he'd already paid.
Christina Tetreault, a staff attorney for Consumers Union, says although the terms of deferred-interest cards have recently gotten clearer, you can still get trapped.
"The disclosures on these cards are really not enough to help consumers understand what they're actually buying," said Tetreault.
Besides Best Buy, Home Depot, Wal-Mart, and other retailers promote deferred-interest loans.
You'll also find solicitations for deferred-interest credit cards designed for health care expenses in doctors' offices, a setting where people struggling to pay for care could be most vulnerable.
"The very location of the solicitation within a doctor's or a veterinarian's office or a dentist's office is inherently exploitative," said Tetreault.
Consumers Union, the advocacy arm of Consumer Reports, says deferred-interest cards, while legal, are dangerous financial products and often carry high interest rates.
"We think they should be banned," said Tetreault.
Watts says he'll never fall for another deferred-interest credit pitch again.
Meantime, Consumers Union and other consumer groups have asked the new federal financial watchdog board to look into deferred-interest credit cards, and the Consumer Financial Protection Board says it will.
