Current Events in November 2016

You see the offers in huge bold letters in furniture store windows – “90 Days Same As Cash!”

That means you can buy a truckload of furniture today and not pay anything for three months, including interest. Pretty sweet deal.

There are also lots of credit and charge card offers that allow you to carry a balance interest-free for a year or more. Another big savings.

But in addition to reading the big bold letters, you also need to read the fine print in the credit agreement, because some of them can lead to expensive surprises if you don't handle them exactly right.

Little margin for error

The Consumer Financial Protection Bureau (CFPB) warns that deferred interest financing can be tricky for this reason: if one of your payments is late during the no-interest period, you could be on the hook for interest on the entire purchase. You may also be charged for all the interest if you're supposed to pay it off in six months but it takes you seven months.

“Usually, the interest is calculated based on the balance you owed in each month since you first made the purchase,” CFPB explains on its website. “In your case, if you don’t pay the entire balance off in 12 months, you will be charged interest for each month on the balance you owed in each of the 12 months.”

Not all that transparent

Personal finance website WalletHub has just completed a study of retailers offering deferred interest financing. It found that these financing plans are not that transparent, and that retailers have done little over the last two years to make them clearer and easier to understand.

The study found Pottery Barn and West Elm were among the least transparent when it comes to these offers. It said Apple, JC Penney, and Kay Jewelers are among the most transparent.

For consumers, it's important not to take a deferred interest offer at face value. In all likelihood, the offer is contingent on you making regular, on-time payments and having the balance down to zero before the interest-free period is up.

If you have the money to pay for the entire purchase in an investment that is earning money, perhaps taking advantage of one of these offers is safe. After all, you know you will be able to pay off the balance in time.

But if you have little savings and other expenses to worry about, committing to a deferred interest financing plan may be risky, unless you've read the fine print and are comfortable with the terms.

Lenders tend to be cold and objective when they decide whether or not to grant a consumer's credit card application. Meet the requirements and you get a card. Fall short, and you don't.

Consumers don't look at it quite the same way. A new survey from NerdWallet shows we tend to take it personally when a bank says no. The survey found 70% of consumers would stop doing business with a bank that turned down their credit card application.

Rejection of any kind usually is hard to take. But the survey suggests there's an additional ingredient when it comes to financial matters. If a bank declines to extend you credit, you believe it to be a reflection on your financial standing.

It's embarrassing

About half of consumers said a credit card rejection would be embarrassing and they would not tell family or friends about it. About a third believe people who are rejected for a loan or credit card are irresponsible with money, which is far from the case.

If you are rejected for a credit card, the lender is required by law to tell you why. Knowing the reason may not only make you feel better, it can be useful information. In many cases, knowing the reason why you were turned down can guide you to a lender who would be happy to open an account for you.

In many cases, consumers apply for credit cards that are designed for consumers with higher credit scores. That's important, because these cards usually have lower interest rates and more generous rewards. That's because the lender considers these high credit score consumers a better risk.

However, the very same lender may have other credit cards that don't have those stringent requirements. Your chances of success may be much better if you apply for a card within your credit score range.

A number of reasons for rejection

As NerdWallet points out, consumers get rejected for a number of reasons, not just because they have bad credit. They might have too much outstanding debt, a thin credit history, or insufficient income.

That's why before applying for a card, it's a good idea to obtain your credit score and review your credit report, to make sure the information in it is accurate. Once you know your score, look for a card targeted to other consumers in your range.

Many of the credit card comparison websites list credit cards available for those with “excellent,” “good,” “fair,” and even “bad” credit. So, with a 640 credit score you probably are not going to qualify for the Capital One Venture Rewards Card, which is heavily advertised on TV. But you probably will qualify for the Credit One Bank Unsecured Visa.

It doesn't have the advantages of cards designed for excellent credit, but it will give you the chance to show you can use a credit card responsibly and raise your credit score so that you'll soon have more credit options and fewer rejections.