Like all store-branded credit cards, the Home Depot credit card gives customers a lot of great perks. For example, the Home Depot card often advertises deals like no payments for 6 months and 0% interest. But there are a few things to think about before you apply for a credit card. The interest rate may be the most important thing to think about. And the Home Depot credit card does not do very well in this category.
If you look at the Home Depot credit card application online, you might not be able to find the interest rate. And when you get the card at the store, cashiers usually don't try to sway your decision by bringing up this important credit card feature. But the truth is pretty scary. Like most store credit cards, the Home Depot credit card has a rate of interest that is between 40 and 100 percent higher than that of regular credit cards. That's for people who have good credit.
Most major credit card companies offer two things that the Home Depot card does not: low long-term interest rates and 0% interest on purchases and balance transfers for a year. The best credit card for a big purchase that will be paid off over time is a new credit card with no interest on purchases for a year. Why? Let's spend $2,000 on new carpeting and figure out what the difference is.
There are a lot of credit cards with interest rates around 11% and introductory rates of 0% for up to a year. If we used this kind of card to buy $2,000, we wouldn't have to pay any interest on it for the first year. Assuming we paid off $100 each month, the total interest charges would be about $65. The new rugs cost around $2065 all together.
Using a Home Depot credit card with an average interest rate of 22% and the same payment plan, the same purchase would cost us $143 the first year and close to $100 the second year. To put it another way, about $200 more. This is if we don't take advantage of the fact that we don't have to pay for six months. When we add that in, we pay an extra $150 in interest, bringing the total to $350. That means our rugs that cost $2,000 really cost $2,350.
The author thinks that the interest rate is the most important part of a credit card. After all, if we don't pay off our purchases in full every month, they end up costing a lot more than they did when we bought them. For new purchases, especially big ones, the best credit card should be the one with the lowest interest rate and the best introductory rate of 0%. The same is true if you have a balance on a store credit card with a high interest rate. Just move the balance to a credit card with a lower interest rate and a balance transfer APR of 0%. The money saved adds up. Quickly!
