Estimated read time: 2-3 minutes
- Utahns are warned against deferred interest and high-interest store credit cards.
- WalletHub analyst Chip Lupo advises creating a budget plan before holiday shopping.
- Buy Now, Pay Later options are popular but can incur penalties if payments are late.
SALT LAKE CITY — Holiday shopping is in full swing, and Utahns are looking for deals. But some of the deals offered up at the register could cost you hundreds, if not thousands, of dollars if you're not careful.
You've likely heard the pitch, "Zero interest for 12 months!" Careful!
"You've heard the saying, 'day late and dollar short,'" said WalletHub analyst Chip Lupo. "This really applies to deferred interest."
WalletHub has found that 51% of Americans think deferred-interest financing should be illegal. Because just one slip up, even just missing the payment deadline by one day, can get you slapped with all the interest dating back to the original purchase.
But it's legal, and a common scenario with big-ticket buys.
"So, if you bought a $5,000 TV and you paid off $4,999 of it, if you are one day late, you're going to pay all the interest on all $5,000 for that entire time frame?" I asked Lupo.
"Correct," he answered. "Go all the way back to the original purchase date, and as you would expect, it's a pretty high interest rate."
Half of shoppers admit they've taken financing without knowing if they could afford it.
"Retailers sort of prey on that mentality," Lupo commented.
Buy Now, Pay Later is also booming. People are enticed by splitting larger purchases into more manageable payments. Plus, Buy Now, Pay Later is easier to qualify for than traditional credit cards. And typically, there's no interest if you pay on time.
But don't be late or face the penalties. Those fees quickly nullify any benefits.
"We found that 50% of people prefer the Buy Now, Pay Later loans to deferred interest or even financing through a credit card," Lupo said.
Speaking of cards, you've also likely heard the pitch at checkout, "Save 15% or 20% on your purchases today, if you open a card with us."
Careful, especially if you tend to carry a balance. And double — especially if you tend to carry a balance on a store-branded card.
"Store cards are an entirely different ballgame," Lupo said. "Store credit cards can run you 27%, almost 30%-plus interest."
Experts say crafting a good budget plan before you start your holiday shopping is your best bet. That includes a plan for what you'll buy, how much you'll spend and how you'll pay for it. Once you get to the store and you feel tempted by the piles of impulse purchases everywhere, put your hands in your pockets and keep walking.
Don't forget: Twenty-five percent of Utahns who used their credit cards last Christmas are still paying that debt off.
