Q: I’m buying a diamond engagement ring from Samuels Jewelers. They have a few credit card offers for 0% and I’m thinking about doing the one that gives 0% for 18 months on purchases of $1,999+. Would this be a smart decision?
A: That depends. Some of their offers are a good choice if you have bad credit. But for some people, the Samuels credit card will be the worst choice they could make.
I called up a store near me to find out what the current 0% financing promotions were for 2013. Here’s what they told me:
- Purchase of $499 or more = 0% deferred for 6 months
- Purchase of $999 or more = 0% deferred for 12 months
- Purchase of $1,999 or more = 0% for 18 months w/ equal payments
- Purchase of $3,000 or more = 0% for 36 months w/ equal payments
The first two can be downright dangerous if you don’t understand that they are not true 0% financing. Rather, they operate using deferred interest, which is tacked onto your account after the 6 or 12 months is up. If you pay off the balance prior to that, then the deferred interest will never be added on. But if you don’t, then you will get slapped with interest charges going back to the original date of the purchase, for the entire thing!
Getting hit with this deferred interest can be brutal when you consider the high APR on this jeweler’s credit card:
Just do the math…
Say you spend $1,000 on a gold necklace and get the 0% deferred for 12 months. If you didn’t pay it off before that, then on the 13 month you would see $250 in finance charges on your account (24.99% x $1,000 = $249.99). Ouch! So to avoid this, it’s imperative that you pay the full thing off before the deadline.
On the other hand, the last two offers use equal payments – so as long as you pay the full amount due every month and on-time, then by the time the promotion ends you will have paid the full amount without any finance charges. Those two are good deals as long as you have the discipline to follow thru with all your payments and making sure they’re on time.
Samuels vs. other credit cards?
For the most part, the only people who can benefit from the Samuel’s Jewelers credit card are those who have a poor credit history. If regular banks won’t approve you for their cards, then getting a jewelry store or department store card might be your only option. They work with 3 different financing companies (1 in-house, 1 is Comenity, and 1 other third-party lender) so chances are, they can get you approved even if you have a scandalous financial past.
But whether your credit is good or not, I would encourage you to first check if there are any Visa/MasterCard’s with 0% offers that you might qualify for. The reason? Because those won’t use the deferred interest scheme. So even if it takes you longer to pay down, you won’t have to worry about those finance charges being applied retroactively like Samuels Diamonds credit card does.
Here is a tool I recommend for finding out what cards are best suited for you: