What you need to know about in-store finance | finder.com
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What you need to know about in-store finance

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You can buy now and pay over time — but be aware of potential fees.

In-store finance is traditionally offered directly through a store or company, particularly for big-ticket items such as furniture, electronics and jewelry. It often gives you an interest-free period so you can get what you want right away and pay it off over time or at a later date.

What you’ll find in this guide

How does in-store finance work?

There are different types of in-store financing, including deferred interest, installment plans, layaway and low interest. Here’s how they work.

Deferred interest

Imagine your smartphone is fried and you need a new one. The problem is, the new smartphone costs $800.

Luckily, you find the smartphone at Best Buy, which offers up to 36 months deferred interest when you use your My Best Buy® Visa® Card. You’ll pay no interest when you pay off the entire purchase within the deferred interest period you’re approved for.

You might choose to pay off the smartphone in equal payments of around $34 a month. Then you’ll clear the item’s cost completely by the end of your special-finance period. You could also pay any other amount you want during the period, and you’ll accrue no interest so long as you pay off the phone entirely within the promotional period.

Be careful with deferred interest

One great thing about deferred interest is the payment flexibility it provides. But there’s a big catch: You’ll get an interest bill for the entire deferred-interest period if you don’t pay off your full balance by the end of it.

As an example, say you purchase a $1,000 item with a 28% APR and 24-month deferred interest. Failing to pay off the entire purchase within 24 months can be incredibly expensive: You’ll owe around $750 in interest.

Installment plan

Let’s say you need a $399 microphone for podcasting. Amazon offers special financing on this item under an installment plan, which it calls Equal Pay.

The cost of these headphones is broken down into 12 equal payments, which you make each month. In the end, you’ll pay no interest. While this doesn’t give you the flexibility to vary your payments, you’ll pay off your purchase as long as you follow the plan.

With some installment plans, you must make a down payment on the purchased item. Then, the rest of the item’s cost is broken down into monthly payments.

Layaway

Layaway works similarly to an installment plan. It lets you pay for an item over time and own it after you’ve paid for it completely. Here’s typically how it works:

  1. Find a store that offers layaway.
  2. Choose an item that’s eligible for layaway.
  3. Make a down payment. Some stores let you choose this amount; others set it for you.
  4. Make regular payments depending on the layaway policy.
  5. After you’ve paid off the cost of the item, including layaway fees, you own it and can pick it up.

Before starting a layaway plan, make sure you understand the terms. Also, check applicable costs, which may include service fees, cancellation fees and restocking fees.

Low interest

A retailer may not offer no-interest plans, but it may offer low interest. This can be especially helpful if you want to pay off purchases within a few months, as you may accumulate minuscule interest.

The average credit card purchase APR is 17%. But with retailers offering low interest, you might find APRs around the 5% mark — a much lower figure.

In-store finance and your credit history

In-store cards

Many payment plans are offered under credit accounts, meaning you must complete an application and wait to be approved by a lender. A credit application can affect your credit score, as the lender will initiate a hard pull on your credit report.

Your credit history and credit score may impact your application. If you’re not sure where you stand on these, there are several services that can help.

Credit cards that offer in-store finance

Some store credit cards regularly give you access to in-store finance. Plans vary depending on the card and retailer, but they may offer market-leading interest-free periods you won’t find with normal cards.

Here are a few examples of special financing you’ll find with certain cards:

  • My Best Buy® Visa® Card.
    Deferred interest for up to 36 months deferred interest on home theater and Geek Squad purchases $799 and up. Other deferred-interest promotions for other purchases.
  • WebBank/Fingerhut Advantage Credit Account.
    Payments as low as $6.99 a month.
  • Montgomery Ward credit.
    Purchase APR as low as 5.75% variable.

If you’re confused about a financing offer, ask a store associate to explain the details to you. Alternatively, call the credit card issuer and ask about the process and requirements.Back to top

What other options offer interest-free shopping?

You don’t necessarily have to get store credit to make interest-free purchases. Here are two other options to consider.

0% intro APR credit cards

With a credit card offering 0% intro APR on purchases, you’ll have a period during which you’ll accrue no interest on what you buy. Your purchases will start accruing interest only after that period ends.

Purchase intro APRs usually run between 12 and 15 months, but may last as long as 21 months.

0% intro APR cards may be the “just right” option

Deferred-interest plans may saddle you with a huge interest bill if you don’t pay off your purchases on time. And an installment plan can feel inflexible, forcing you to pay a specific amount each month.
A 0% intro APR card offers the best of both worlds. You have the flexibility to vary your payments from month to month, and you won’t immediately owe a mountain of interest if you don’t pay off your purchases by the intro APR expiration.

Installment-plan providers

Installment-plan providers aren’t as popular in the United States as they are in other countries such as Australia. But they do exist. One of the largest installment-plan providers is Afterpay. Through this service, you can buy items at select retailers and pay for them over four installments. Retailers include DSW, Ray-Ban, Rebecca Minkoff, Forever 21 and more.

Installment plans are common with cell phone providers such as Verizon and T-Mobile. With high smartphone prices nowadays, it can be helpful to pay for them over time.

Compare store credit cards and finance options

Name Product Filter values Annual Fee Purchase APR Recommended Minimum Credit Score
$0
24.9% variable
580
A no-annual-fee credit card and discounts when you shop at Target.
See terms
See issuer's website
300
Build your credit history with low monthly payments.
See terms
See issuer's website
300
Get access to purchase items in the Fingerhut store with no overlimit fees.
$0
5.75% to 23.99% fixed
300
Buy now, pay later — low monthly payments make shopping easier
$0
5.75% to 23.99% fixed
580
Payments starting at just $10 a month.

Compare up to 4 providers

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What to ask before getting in-store finance

If you’re thinking about applying for in-store finance, consider the following questions first.

  • What costs are involved?
    Check for minimum spend requirements, down payments, annual fees and any charges that may apply if you end the installment agreement early.
  • What charges apply at the end of the interest-free period?
    In-store finance options may have very high interest rates, which may be especially important to watch with deferred-interest plans.
  • What type of account will you open?
    Many in-store finance options come in the form of credit accounts, credit cards or standalone installment plans. Think about the type of account you want and avoid getting one you’ll find difficult to manage.
  • Will the account be listed on my credit history?
    While there will be an inquiry on your credit report when you finance a purchase, your payments may or may not affect your credit score.

    If you apply for a credit card or credit account, your payments are likely to affect your credit score as you make payments. An installment plan might not affect your credit score; cell phone payment plans are a common example.

    If you’re not sure whether a finance account will affect your credit, ask the issuer.

  • Do I need this purchase right now?
    If you urgently need something, financing may be one of your best options. But if your purchase isn’t urgent, consider buying it after you’ve saved enough. This can help you avoid fees and interest. Also, consider passing on the purchase completely if you realize you don’t need it at all.

Bottom line

With in-store finance, you can make a purchase and pay for it over time. Watch out for interest rates and fees. Above all, consider whether you really need something you’re thinking about financing.

Some financing offers are available only through store credit cards.

Pictures: Getty Images

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