How Creditors and Retailers Trick You into Paying Higher Interest

Let’s say you are interested in a new dining room table with chairs you have been enticed to buy from Macy’s using their 20-percent discount if you open a charge account with them.  Let’s also suppose the cost is $1,000 after the 20 percent discount, meaning the sticker price is $1,250.

Now let’s examine the zero-interest rate and terms on the charge account with the 20 percent offer:

“No interest on this transaction if paid in full in 12 months and MacysChargeCardrequired minimum payments are made.  If the balance is not paid in full in 12 months or required payments are not made, interest will be imposed at a rate of 24.5% from the date of purchase until the balance is paid in full.”

I would content that Macy’s paid a wholesale price for this furniture set of $500. If most people come in on this discount and purchase the set using the new Macy’s account and then pay the minimum, the actual cost will be at least $1,245. That’s some mark up for Macy’s!

Now I am not arguing Macy’s not make money.  They have quality furniture and if I want a nice table and chair set I have found at their store, then I must be willing to pay their price.  What I am arguing is how a 20 percent discount might get you into their store and attract you to open a charge account with them, only for you to end up paying the full asking price even after you got the so-called “discount.”

It doesn’t seem wise to take advantage of these kinds of offers only to end up paying full price by putting the purchase on a retail credit card at 24.5 percent. A better way perhaps is to search sites like Amazon or Overstock and other online stores for just the set you want and save an actual 50 percent. Don’t let sales discounts grab you emotionally  and stop your thrifty behavior. Do a little homework just to get in the habit of checking things out.  Oh, and it also helps to have the cash in your pocket so you can spring fast if you find just what you want without having to put anything on a card!