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Not that you didn’t know already, but the annual holiday shopping season has arrived! From the hectic “tradition” that is Black Friday to decorating for the big day, there’s something to be said about the holiday stress sandwich that is the first three weeks of December. 

There is also the “holiday hangover” of it all, where, if this year is anything like 2022 it will take months, and for some, the entire following year, to pay off this season’s holiday spending. According to the National Retail Federation, Americans are expected to spend an average of $875 on the season, which presents an especially large challenge for many consumers considering this year’s record-high interest rates of nearly 30 percent and the various financing ploys seen from store credit cards. 

More specifically, Bankrate’s recently released retail credit cards survey found the average APR for retail store cards came in at a record-high 28.93 percent, approximately eight percentage points higher than the national average for all credit cards. Some stores charge as high as 33.24 percent. 

Financing offers are particularly enticing during pricey holiday shopping campaigns, which make payment programs like “buy now, pay later” and especially “deferred interest” programs such treacherous options to consider, compared to the safety, security, and flexibile transparency available with a small-dollar loan from a local credit union. Take, for instance, the tricky “zero percent” promotions that retailers entice shoppers. They’re actually deferred interest offers (read the fine print on the receipt), a dangerous and financially unhealthy program that can be extremely costly in the event you don’t pay off the entire balance before the clock runs out. 

Yes, it’s exactly as bad as it sounds, maybe worse; deferred interest is what WalletHub wisely describes as a wolf in sheep’s clothing: pairing an attractive low-interest offer with a clause that allows the deal to turn hostile if your member basically makes any mistake at all.

That’s right: If your member has any of the balance left to pay before the deferred interest period ends – it doesn’t matter if a dollar is left to pay or a thousand dollars – the retail credit card issuer charges them all of the interest that would have stacked up back to the start of the term. 

The story is all-too-familiar to consumer groups and finance professionals who keep a watchful eye on such payment plans.

“Amid all  the holiday deals, consumers really need to watch out for the double-edged sword known as deferred interest. If you’re careful, it could help you finance holiday gifts interest-free. On the other hand, it could make your holiday shopping up to 27.5 percent more expensive than you’re planning for,” says WalletHub editor John Kiernan. The risk associated with deferred interest financing offers is even greater than normal this year, considering how high the regular interest rates on store credit cards have gotten. The average store credit card APR is currently at a record of almost 30 percent.”

Fortunately, consumers in general do not favor deferred interest programs, and there are plenty of numbers to show for it. Check it out a few key notables about store credit card financing, courtesy of WalletHub: 

  • Many shoppers don’t know before they owe: A full 28 percent of Americans have agreed to special financing without confirming they can actually handle the monthly payments required of them. 
  • Large at-risk population: 59 percent of Americans don’t understand the fundamentals of how deferred interest works.
  • Retailers lose respect: 76 percent of people claim they would look upon a store that uses deferred interest negatively. 
  • Major retailers still offering deferred interest: Amazon, Best Buy, and Home Depot, and others

There are also a number of ways to make sure your members avoid the unpredictable consequences of deferred interest deals both during the holidays and after:

  • Make an informed, conscious decision: If a member can’t save more with other offers, and they’re more than confident they can pay off the balance on schedule, go ahead with a deferred interest deal. The problem is that so many Americans don’t realize or understand the deal to which they’re committing before it’s too late. 
  • See if they qualify for true 0 percent offers first: General-purpose credit cards with 0 percent introductory APR offers don’t use deferred interest. Only the remaining balance at the end of the introductory period is subject to interest at the card’s regular rate. The best cards offer 0 percent for up to 21 months, so if your member has anywhere near a good-to-excellent credit score, the odds of them being approved are good.
  • Schedule out your members’ monthly payments: Planned budgeting is important for most, if not all, holiday shoppers. But it’s super-important if they’re paying off their purchases with a deferred interest arrangement. They have to know precisely how much they owe every month in order to come out interest-free ON TIME. 
  • Consider balance transfer credit cards if time is short: If time is running short on a member’s deferred interest offer and they realize they can’t pay the full balance in time, advise them to consider dumping their remaining balance on a 0 percent balance transfer card. Even with the three percent transfer fee, that pales in comparison to the deferred interest re-materializing over their head and the financial stress it adds to their potentially unhealthy financial situation.
  • Invest in the safety of a credit union small-dollar loan: The good-faith guidance that comes with your local credit union shows members the cooperation, assurance, trust, and financial growth that comes with a dependable QCash Holiday Loan. Rather than merely hoping to make all the payments on time with risky deferred interest deals, holiday shoppers can rest easy with your credit union knowing they worked with staff who care about their financial health goals and figured out a payment plan that fits their financial capabilities.

Members in such situations should also be tactfully advised that sometimes the holidays don’t need the latest Apple tech gadgets or a new 56” flat-screen TV. “That’s why it’s always a good idea to only spend what you can afford to pay off by your credit card’s due date, if you can manage it,” Kiernan advises. “If you do that, a credit card with attractive rewards is a better choice than one with a low introductory rate, deferred interest or not.”

If you’re interested in having a conversation about how QCash can help your members avoid treacherous financing potholes hurting their financial health during the holiday shopping season, do not hesitate to reach out through our Contact Us page. We look forward to speaking with you!