Top Credit Cards for Holiday Shopping

NEW YORK (MainStreet) — With the kickoff of holiday shopping, you may be contemplating some sweet-sounding credit card offers. But be careful: The 0% financing deals so plentiful this time of year often come with a hidden trap known as "deferred interest" that can jack the rate sky-high if you're not careful.

Before racking up charges, shoppers need to think carefully about just what card features will serve them best, says Card Hub, the card-information site. The zero-percent deal may not be the best.

"Often advertised with bold tag lines stating 'Zero percent Interest for 12 months' or 'Special Financing,' these plans sound great but the fine print reveals how financially disastrous they can be, since the regular rate applies retroactively to the entire original balance if you do not pay in full by the end of the promotional period, or you make a late payment, no matter how much of the balance you have already paid back," Card Hub says.

There's a fine distinction that is easily missed. In the best deals, your card may offer zero percent on new purchases for six months, then start charging interest. In that case, if you took seven months to pay off $800 in charges, you'd be charged just $2 in interest for that seventh month, assuming a 20% annual rate, Card Hub says.

But a deferred-interest card would penalize you for not paying off the entire balance by the six-month deadline. You'd pay all the interest that would have accumulated during those six months had there been no zero percent deal in the first place. Interest charges after seven months would therefore be $55, assuming the same 20% annual rate, Card Hub says. Even if you'd paid down much of the debt before the six months ended, you'd be charged as if the balance were still the entire $800.

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