Walmart announced last week that it would no longer offer 0%-interest credit card promotions that use a “deferred interest” model. With “deferred interest” offers, credit card holders can finance larger purchases at a 0% rate for a set period of time (usually 6 or 12 months), but they must pay off the complete balance within that promotional period or all of the interest that would’ve accrued since the date of purchase suddenly gets added to the bill.
As a blog post from Walmart’s Daniel Eckert points out, using a 12-month period as an example, “…even if you have just a fraction of the purchase price left to pay on day 366, you could owe 12 months’ worth of interest based on the balance. That means your wallet could take a significant hit.”
Walmart’s new policy on 0% offers is to charge interest after the promotional period ends only on any balances that have not been paid off. For example, if you’ve financed a $1500 purchase at a 0% rate for 12 months but you only manage to pay off $1200 within that time period, you will only be charged interest at the card’s regular interest rate on the $300 remaining. And you will only be charged that interest starting the day the promotional period ends.
If Walmart’s new policy is how you thought 0% offers worked all along, you are not alone. The “deferred interest” language is usually in smaller type when you see 0% credit card promotions, but if you look around at these offers, you will find that “deferred interest” is the much more common formula.
We hope that other retailers will follow Walmart’s lead in ending deferred-interest credit card offers.
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