Before you grab that great deal through a store’s special financing offer, make sure you know what you are signing up for.

About half of retailers offer credit cards with deferred interest, yet 56% of Americans don’t know how the financing strategy actually works, a study from personal finance website WalletHub found. It polled more than 300 U.S. adults in October.

That lack of knowledge could mean a big bill for you down the line. While you pay no interest or a reduced rate for a period of time, you may get a high regular APR retroactively applied to your original purchase amount if you pay one month’s bill late or even owe as little as $1 when the promotional period ends.

For instance, if you charged $800 on a normal credit card that had a 0% APR promotion for six months, and it takes you seven months to pay it off, you’d owe $2 interest, assuming a 20% regular APR, according to a WalletHub analysis. With a deferred-interest card, you’ll wind up paying about 27.5 times that amount — or $55 in interest — in the same scenario, the website found.

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“It not only negates any savings there was from the promotion, you wind up paying much more for that item than you probably planned on,” said Jill Gonzalez, senior analyst for WalletHub.

Among those who do understand deferred interest, 77% think it is unfair and 69% think it should be illegal, the WalletHub survey found. (See WalletHub’s list of retailers who use deferred interest credit cards here.)

Americans have an average of 2.33 retail credit cards and an average balance on those cards of $1,887, according to Experian’s 2021 State of Credit Report. The interest rates are generally higher than other credit cards. They have an average APR of 27.93%, WalletHub said.

This time of year, it may be especially tempting to sign up for a deferred interest card in order to snag good deals on your holiday gifts. Yet, busy stores mean long lines and potential pressure to sign up without reading the fine print, Gonzalez said.

If you are offered the choice of special financing or an initial discount on your first purchase, go for the discount since there are no strings attached, she advised.

If you do take the deferred interest offer, make sure you listen carefully, know the terms of the APR and pay off the purchase before the introductory period ends.

To be sure, there are retailer credit cards that offer deals without deferred interest, including 0% introductory APR on purchases that lasts, on average, 16 months. About 29% offer ongoing rewards, primarily in the form of points, a WalletHub analysis found.

Think about retailers you frequent throughout the year and not just for your holiday shopping, Gonzalez said. For instance, stores like Target and Kohl’s offer cards with perks like discounts or rewards, she said.

Just make sure you don’t accumulate debt.

“People are certainly spending,” Gonzalez said. “There is a lot of pent-up demand and there is also inflation making costs higher for certain goods.

“There is that chance you will over-leverage yourself and spend money you do not have.”

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