How to Pay for a Big Holiday Purchase (Without Paying Interest)

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If you’re just now getting ready to shop for the holidays and don’t have enough cash on hand to cover everyone’s gifts, don’t panic. You don’t need to dip into your emergency savings or rack up interest charges on a pricey credit card to finance your festivities.

If you plan it right, you can borrow for your purchases without paying a penny in interest. Just be sure to carefully read the terms before agreeing to a last-minute loan.

Some holiday financing schemes aren’t nearly as good a deal as they seem.

Here are four ways to spread out your payments, interest-free:

1. Shop around for a credit card with a zero-interest promotion.

The best way to finance a big purchase without paying interest—or any fees—is to secure a brand-new credit card before you set foot in a mall. Many credit cards offer lengthy interest-free promotions, allowing you to purchase your gifts now and pay for them later, without incurring any extra charges.

Most cards with zero interest financing deals give you at least 12 to 15 months to pay down a big purchase, interest-free. But some cards will go even further, giving you almost two years to pay off your purchases. The Citi Simplicity card, for example, will give you 21 months to pay down your credit card balance without incurring any interest. The U.S. Bank Visa Platinum card will give you 18 months.

The catch: You typically need excellent credit to qualify for a card with an interest-free offer—especially if you’re hoping for a card that gives you 15 months or more. You’ll also want to make sure you can afford to pay off your purchases before the card’s 0-percent APR expires. As soon as the promotion ends, your card’s standard rate will kick in and you will have to start paying interest on the remaining balance.

2. Sign up for deferred interest financing.

Many retailers will also let you put off paying for a big purchase by offering a deferred interest financing deal on a store credit card. For example, a number of popular holiday-gift destinations offer “no interest” financing, including the Apple Store, Toys R Us, Best Buy and Kay Jewelers. These programs let you buy your purchase now and pay zero interest on the loan—if you pay your purchase in full before the interest-free period expires and don’t miss any payments.

The catch: If you don’t manage to pay off the full purchase amount before the deal’s interest-free period expires, you won’t just be responsible for interest on the remaining balance—you’ll also be on the hook for retroactive interest payments on the total amount you spent!

The APRs on deferred interest cards are also notoriously high, so you could wind up with a huge bill if you miss the “no interest” deadline. According to a recent survey by Wallet Hub, for example, most deferred interest plans charge rates well above 20 percent.

Use extreme caution before you sign up for this kind of plan and make sure you know exactly how much you need to pay each month to knock out the balance before the end of the promotion.

3. Use an AmEx card and ask if you can “Plan it.”

In 2017 American Express unveiled a flexible payment option called “Pay It Plan It” that lets you pay off some purchases interest-free over a period of time. If you choose the Plan It option, American Express will set up an interest-free installment plan that lets you pay for your purchase with smaller, more digestible monthly payments. You can pick a three-month payment plan, a six-month option or a ninth-month plan, depending on your budget. You can also pay off your balance early.

The catch: You have to pay a fixed monthly fee as long as you have a Plan It balance. American Express doesn’t disclose exactly how much consumers are charged, so it’s not clear how much you’ll actually save. Instead, it says that each fee will be calculated individually.

Not all purchases will qualify either. You have to spend a minimum of $100 at a time to take advantage of the option and can’t combine purchases onto one plan.

4. Put your purchase on layaway.

Many stores also offer interest-free layaway plans during the holidays, allowing you to pick out a purchase well before gift-giving season, put down a small down payment and pay off the rest over a couple months. Stores will hold onto your purchase until you’re done paying for it so you don’t have to worry about it selling out.

The catch: Many layaway plans charge a small service fee (typically around $5 to $10), so you’ll still have to shell out some money to draw out your payments. However, some stores waive those fees during the holidays. You also won’t have much time to pay. Layaway plans often require you to pay off your purchase within a couple months.