Recognizing the No Payments No Interest Credit Card Trap

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Recognizing the traps that marketers put together with the purpose of enticing your to apply for and use a credit card can save you a lot of money.

No payments and no interest until next year!

Have you heard that promise before? Sounds like a really good deal. You can use plastic now and get a free interest ride until next year. You get the benefit of keeping the stuff while paying absolutely nothing.

Take a deep breath, get a good grip on reality, and look at the fine print.

You do not have to make any payments of any type until next year, but while you are enjoying your purchases for several months, the interest is silently accumulating.

Huh? They say that I would not pay interest for a year.

Yes, that is exactly what they tell you and that is true. You will not have to PAY the interest… but they did not tell you that the interest would still be adding up monthly to give you a huge surprise when your first payment comes due in January.

The truth behind the trap

You purchase a new sofa for $650 in September using a store credit card which promises that you will pay nothing until next year. Your credit card balance is $650 for the first month. Then, the next month rolls around and interest is added to your balance.

2 days at $0 = $0 + 28 days at $650 = $18,200 divided by 30 days = $606.67
$606.67 multiplied by your store interest rate of 26% = $157.73
Your balance of $650 plus the interest of $157.73 = $807.73

$807.73 is your new balance for October.

Do the same math for each month, assuming that you make no new purchases, and your balance with interest on January 1st will be $1615.76, which includes $965.76 in interest.

Is that a deal for a $650 sofa? I think not.

Think before you speak

Do not get sucked into the marketing trap that makes you think you are getting a bargain or that the company just really likes you. They do not like you. They like your paycheck and they want as much of it as they can legally take.

Say “no” to the no payments, no interest credit card trap.