Let’s say you buy a great new TV for $2,400 with the promise that you will pay no interest if you pay it off in 24 months. You faithfully pay $100 every month, but in the final month, you have unexpected expenses, so you pay only $25. After all, you only owe $100 now, right? The next month, you expect to pay $75 plus one month’s interest on that amount—but your bill is a shocker. You discover you are now being charged all the interest, on the entire amount, going back to the date two years ago when you purchased that TV. Ouch!
That’s how certain stores seem to be managing some “no interest” financing arrangements when you use their store credit cards for large purchases. These don’t seem to be “no interest” arrangements so much as “deferred interest” arrangements.
For example, Samsung’s website has a series of offers, for “No Interest if Paid in Full within 6, 12, or 24 months.” But the smaller print says, “If the purchase amount is not paid in full within 6, 12, or 24 months, interest is charged from the purchase date, as applicable. Standard APR 29.99%.” From the purchase date—does this mean they are charging interest on the full amount?
Raymour and Flanigan’s website details similar credit offers, including one for “No Interest if Paid in Full within 12 Months”. The fine print says, “If you do not pay the balance in full by the expiration date, interest will be assessed from the date the purchase posts to your account at the standard APR, currently 28.99%.”
Then comes an even more interesting statement: “Making only minimum payments will not pay off the balance in time and larger payments will be necessary.” Does the store card billing statement show the amount the customer must pay each month to get the no-interest offer or not? Is it up to the customer to keep an eye on the calendar, to make sure the full amount is paid off within 24 months, while the statement invites the customer to pay less?
When customers enter into one of these arrangements, do they truly understand what it involves? Or do most customers assume that these offers simply mean they will be charged no interest for a number of months?
And is it legal to charge interest on amounts that the customer has already paid off? When you are down to that last $75, can a store go back and charge you interest on the full $2,400 that you no longer owe?
We’re investigating all this right now, in connection with the following merchants:
- Raymour and Flanigan
- Fred Mayer Jewelers
- Namco Pool
- Jordan's Furniture
- Mor Furniture
- Cub Cadet
- Forest River
- Pilgrim Furniture
If you have participated in these kinds of no-interest or deferred-interest payment arrangements with these merchants, fill out the form on this page and let us know what your experience was.Article Type: Investigation