Some store credit cards come with a 'nasty gotcha,' says expert—it can cost you 'a huge sum'

If you’re doing any of your holiday shopping in person this year, you may be asked if you’d like to sign up for a store credit card at checkout.

It’s a tempting offer. You can generally apply right there at the register, and doing so often means a sizeable discount on your purchase. But before signing anything, make sure you know exactly what kind of deal you’re getting, says Ted Rossman, a senior industry analyst at Bankrate who focuses on the credit industry.

“It’s definitely a big buyer beware,” he says. “A lot of us are going to be offered these at the checkout counter this holiday season. The fourth quarter is when most of these retail card signups take place.”

Some retailers entice consumers to sign up by offering an interest-free grace period — with a big catch. Some 80% of store cards with 0% APR offers come with what’s known as “deferred interest,” according to a recent study from WalletHub. Essentially, if you carry any balance at the time your grace period expires, you’re retroactively charged for all of the interest that would have accumulated.

“Deferred interest is a really nasty gotcha, because a lot of people don’t understand what it means,” says Rossman. If you don’t know the rules, it can end up costing you far more than whatever you saved on that initial purchase, he says.