In-store credit: The pros and cons

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Christmas is almost here, and with it come the endless pitches for store cards aka in-store financing.

‘Would you like to save 15% on your purchase today?’ You know the line from the cashier; it’s something they’re trained to deliver by rote!

Is in-store financing worth it?

With a 0% purchase card or plan, a retailer, furniture store, bedding store, appliance store or electronics store may offer you what is known as a “no, no, no” plan. That means no down payment, no payments and no interest for a period of time.

Read more: How to get your finances in order in 30 days

It is common for a furniture store to sell you a bedroom set for let’s say $1,499 12 months same as cash. That means if you qualify for the store financing you use the furniture for ‘free’ for those 12 months. Usually you must then pay in full no later than the day before the 1 year anniversary date to avoid interest charges. There are many variations though.

Other plans will issue you a store card with a pre-established credit limit. Any item you buy qualifies under the 0% offer at that time. You may buy one item that allows you 0% interest for 24 months. A later sale may offer you another 6 months of 0%. Take the time to read the terms as it seems every 0% offer is different.

Keep the paperwork for each offer so that you don’t trip yourself up and owe interest or fees you could avoid if you do everything by the rules. Many times you will have to make a minimum payment each month, but with other offers you may have no payments for a set time.

One word of warning: Don’t open multiple 0% cards in a short period of time. Doing so can really hurt your credit. Make sure you’re not trying to qualify for a car loan in the next 3 months or home loan in the next 6 months. And that you will get it paid off before interest accrues!
The interest is so ugly that if you have something like 180 days same as cash no interest and you’re at day 170 and you can’t get it paid off…believe it or not, it’s worth it to take a cash advance on real card to pay off that balance so you don’t get hit with retroactive interest to day 1.

There is one store card I make an exception for. The Target RED card gives you 5% off everyday on pretty much everything. This can make a lot of sense if you shop a lot at Target. Other than that, be careful!

Read more: Not all credit card comparison shopping sites are created equal

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