Want a fancy new Macbook but don’t have the cash for it right now? Don’t worry, Apple offers two ways to finance the purchase — PayPal Credit or Barclaycard Visa (with points!).
As you might imagine, I don’t think buying a computer on new credit isn’t the greatest idea. If you are doing so, it’s almost certainly because you don’t have enough credit already via a credit card. But there might be some exceptional circumstances where it makes sense. If you feel you must, pay careful attention to the details. I’m not a fan of the disclosures.
Apple fans might be tempted by this card for two reasons. The card offers points (triple points!) on Apple purchases, which can add up to free Apple Store gift cards. And the card offers interest-free credit if paid off during the promotional period. But….
Like all these old “same-as-cash” deals, there’s a big trap in the Apple offer. Interest does accumulate during the promotional period, and if you fail to pay the balance off in full, you’ll owe a big chunk of money. So, for example, if you buy a $1,200 MacBook Air today, you get 18 months to pay that off. If you don’t pay every last cent by January 2017, you’ll owe a lot of interest to the Barclays folks. As an added trap door, there’s a second way all that interest kicks in — if you make any late payments during the entire 18 months.
How much interest? I can’t tell you. Maybe $50, maybe $500? Just a guess. In fact, it’s pretty darn hard to find out what the interest rate *might* be. Let me take you through the clickstream.
When you navigate to a laptop at Apple.com, you are presented with the full price and an “as low as” price, hawking the financing options. In the example above, users are quoted “$1,199.00 / From only $57.57 for 24 months*” Click on the finance option, and you arrive at a page offering a PayPal Credit payment calculator or the Barclaycard option. If you are curious how much that costs or how the deal works, you might be inclined to click on “see terms and conditions for details. Learn more about financing with the Barclaycard Visa with Apple Rewards.” Once there, you see a frequently asked questions page on Barclays servers. Fourteen questions down — 14! — you’ll see “What is the annual percentage rate?”
You can’t see it, at least not there. Here’s the answer you get: “Please see the Terms and Conditions for Annual Percentage Rates available to new applicants.”
OK, so back a page. Armed with no information about potential financing costs, the would-be buyer’s only option is to click on “Apply Now.” After doing so, you’ll see a gleaming silver Apple Rewards card image, a big form to fill out and….after scrolling through all that, you’ll see “Legal Terms and Conditions.” And in that section, you’ll see a chart that finally says:
“Annual percentage rate for purchases: 13.99%, 19.99% or 26.99%, based on your credit worthiness. This APR will vary with the market based on the Prime Rate.” (There’s also a link to a pop-up with that information closer to the top of the page under the words “Learn about financing at Apple.” I missed it on first reading).
Might as well say 0-30 percent. Not very helpful.
But, also perfectly legal, according to Chi Chi Wu, a lawyer at the National Consumer Law Center.
There’s two obvious problems with the Apple / Barclay disclosures. First, it shouldn’t be so hard to find the APR. And second, what good is a huge range of APRs when a consumer is trying to shop around for the best deal? Remember, the mere act of applying for a credit card hurts your credit, so you can’t just apply for a card, decide it’s a bad deal, and move on harmlessly.
Let’s take them one at a time. First, the location of the APR disclosure.
“The disclosures only need to be with the application or solicitation. So if you can find them easily when you start applying, I think that probably would be compliant,” Wu said.
On the other hand, the use of APR ranges is something the NCLC is trying to change. It sent a letter to the Consumer Financial Protection Bureau in May requesting an update to credit disclosure rules.
“One of the fundamental problems with credit card disclosures is that they simply do not provide adequate information about the APR for consumers who are comparison shopping,” the letter reads.”We encourage the CFPB to require disclosure of a single APR, not a range of APRs or multiple APRs, when it is feasible to do so.”
Naturally, it’s not feasible for Barclaycard — or any credit card issuer — to give a specific rate to a generic Internet shopper, as the rates are based on personal characteristics. But even conceding that, the Apple / Barclaycard has an incredibly wide range. Even in the example cited by the NCLC, the range is a far narrower 8.99% to 19.99%. (By the way, this matter a lot. On balance of $1,000, that’s an annual difference of over $100 in interest, the NCLC points out. Closer to $150 if you’re talking about an 18-month deferred interest deal, and closer to $200 if you span the gap on the Apple application).
The NCLC points out that, even in the challenging Internet shopper scenario, it’s possible for shoppers to get a better APR warning.
“For applications over the Internet or mobile applications, issuers should be required to provide a pop-up after the consumer submits his or her personal information, but before the application is approved, that provides APR information, i.e., a pop-up that says: Your APR will be 19.9%. Do you wish to accept this offer?’ ” the NCLC writes.
So, back to my original proposition. Let me stress that Apple and Barclaycard aren’t doing anything that some other credit card issuers and retailers don’t do. The problem is Apple’s cache with users, which might nudge someone who otherwise makes rational credit choices to make an irrational one. The writers at MagnifyMoney.com make another great point about why this Apple Rewards card is a bad deal — sure, getting points towards Apple products with other purchases sounds great, but that’s a terrible deal when combined with any card designed to carry a balance as part of a deferred interest offer. New purchases on the card will incur interest charges immediately of 13 percent or more, as they aren’t covered by the deferred interest offer. Those points will be really expensive.
The moral? Just don’t finance a new computer purchase if you don’t have enough credit on your standard credit card that you pay off every month. If you have to carry a balance for a month or two on that card, it’s not the end of the world. It’s much better than ending up with a new piece of plastic in your wallet that’s full of gotchas.