Avoid home improvement financing's no-interest catch

Nuts and bolts

No interest for six months sounds like a great deal. So what’s the catch?

Let’s take a look at the promotional financing offered by two major home improvement retailers and examine how consumers can avoid unexpected charges.

Home Depot Consumer Credit Card: Home Depot’s credit card promotion offers no interest on purchases of $299 or more if paid in full within six months. But you'll have to make minimum payments, and there is a fee of up to $35 for late payments.

If you’re late on one of those minimum payments or if you haven’t paid your entire balance by the end of the promotion period, you’ll owe interest not just on the part of that new lawnmower you haven’t paid off yet but on the full purchase price.

The APR will fall somewhere between 17.99% and 26.99% (prime rate plus 14.74% to 23.74%), depending on your credit score.

If you were to slip up under a best-case scenario where you made the smallest qualifying purchase ($299) and received the lowest possible interest rate (17.99%), the mistake won’t be too costly.

If you used the card for a larger purchase of $1,500 and got the highest possible interest rate, 26.99%, a slip-up would be expensive.

Lowe’s Consumer Credit Card: Lowe’s offers promotional financing through its consumer credit card promotion on single-receipt purchases of $299 or more.

There is no interest if you pay the balance in full within 6 months, but interest otherwise will be charged from the purchase date. The APR is 24.99%.

This promotion also requires consumers to make minimum payments.

Unlike the Home Depot promotion, the Lowe’s promotion does not state that a late payment will trigger the interest-from-the-date-of-purchase penalty. There is a $25 or $35 late payment fee.

The key to not being blindsided by the fine print of these offers is simple: read the offer in its entirety (available on each store's website) and make sure you understand it before you sign up.

Better yet, our best advice is to simply stay away from store-issued credit cards.

But if you are considering a store card, don’t feel pressured to sign up on the spot when you’re at the store; take the offer home, read it when you’re feeling alert and take the time to think it through.

Remember that store employees are not credit experts, nor is anything they tell you binding, so don’t rely on them for advice -- trust only what you can get in print.

If you do sign up, make sure to stay on top of the payment deadlines if your goal is to avoid late fees and interest.

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