Buy now, pay later offers on big purchases sound great to lots of people. You get on-the-spot approval for a loan you might not have to pay off for years, but Consumer Reports says beware. They're taking a closer look.
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 dollars in interest on a balance of roughly,7 or 800 dollars,” says 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 and even on the money he`d already paid.
Attorney and financial expert Christina Tetreault 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,” says Tetreault.
Besides Best Buy, Home Depot, Walmart, 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,” says 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.
“They should be banned,” says Tetreault.
As for Doug Watts? He says he`ll never fall for another deferred-interest credit pitch again.