“This means not having to worry about interest accruing during the promotional period and being assessed after the promotional period is over,” says Kirsty Ward, vice president for financial services at Wal-Mart, in an email.
Deferred interest is common among store credit cards and can be costly to consumers. With deferred interest promotions, you get a certain period of time to pay off a purchase — say, a year or 18 months. If you pay in full by the end of that period, then you’ll be charged no interest. But if any balance remains at the end of the promotional period, you’re charged interest on the entire purchase amount, all the way back to the time of purchase.
Even a small balance of 25 cents can put you on the hook for months worth of interest, adding up to hundreds of dollars.
By contrast, on a bank credit card with 0% APR offer, no interest accrues at all during the promotional period.
The back-end pricing of deferred-interest products makes costs less predictable and transparent to consumers, says Richard Cordray, director of the Consumer Financial Protection Bureau. He adds that it often fosters questionable or illegal marketing.
“We are encouraged by this announcement, and we will continue to monitor this development carefully. We hope to see others in the industry reconsider their reliance on deferred-interest products which can impose significant costs on consumers,” Cordray said in a statement.
Wal-Mart offers cardholders six months of 0% interest for in-store purchases of $150 to $298.99 and 12 months of 0% interest for in-store purchases of $299 or more.
Wal-Mart cards earn 3% cash-back for purchases at walmart.com, 2% for purchases from Murphy USA and Wal-Mart gas stations and 1% cash-back for all other purchases, including those in-store at Wal-Mart. The company’s credit cards are best for people who do a lot of online shopping at Wal-Mart. Otherwise, flat-rate cash-back credit cards will likely generate greater rewards.
Melissa Lambarena is a staff writer at NerdWallet, a personal finance website. Email: firstname.lastname@example.org. Twitter: @LissaLambarena.