credit card

Even if you think buying presents is great fun, there’s a costly credit card trap that can suck all the joy from holiday shopping. Before you ruin your yearly budget, learn how deferred-interest retail credit can cost you bunches.

How the enticement works

Retailers targeting consumers with weak credit scores make rosy credit offers in the months leading up to the holidays. But if you opt for that appealing “no interest for x number of months” offer to subsidize over-the-top holiday gifts, you could get caught. While it’s explained in the fine print, it’s not always obvious that you must pay the entire promotional balance by the day the offer ends. In other words, if the deal was “no interest until June 30,” your total payment must be square by then.

If you fall short by even a small amount, the credit card company retroactively adds 100 percent of the interest on the charges you made during the promotional period, starting from Day One.

Read the fine print

In addition to needing to pay the full amount before the delayed interest period expires, your zero interest can also lapse if you ignore other agreement restrictions. If you forget to make the minimum payment or pay late one month, for example,  zap, the company can charge you full interest.

If you still want to take a company up on one of these offers, make sure to set up auto-pay so you’re never late with payments. Also create a monthly payment amount that assures you’ll pay the total before the deferred interest rate period is done.

Better holiday spending options

To avoid the deferred interest trap altogether, budget what you can spend at least a month before shopping season starts. Tally all the demands on your holiday budget on one page, from meals to tips to gifts.

When you catch yourself exceeding the budget, or realize you don’t have the money to do it all, modify your budget and then your spending. Sure, your December won’t be as jolly with the scrimping, but not agonizing over unpaid debt the rest of the year will make up for it.