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Updated on Thursday, February 11, 2016
Plenty of consumers today either make a proactive choice to ditch credit cards or are unable to gain access to one due to a low credit score or non-existent credit history. In response, payment processors like PayPal offer a credit service where shoppers can finance purchases with online retailers – but more and more independent businesses are following the trend and offering their own lines of credit for online shopping portals.
Fingerhut is one such website. Fingerhut acts as a catalog that focuses on being able to finance your purchases. The site allows you to purchase and receive items now, and then make monthly payments on what you ordered to pay for them in full over time.
But is it really shopping on credit now and paying later?
How Fingerhut Works
Fingerhut is an online shopping portal that sells “everything from furniture and bedding to jewelry to the latest electronics.” All purchases are made on a line of credit extended by the company and customers must repay their balances with monthly payments.
You’ll receive an answer immediately when you apply for credit, and some customers are able to start shopping instantly. Purchases that aren’t paid off in full after buying accrue interest, with an APR of 25.15%. There are no annual fees.
Fingerhut offers two programs for customers to receive credit: the Fingerhut Advantage Revolving Credit Account and the Fingerhut FreshStart Credit Account.
The Revolving Credit Account “may or may not require a one-time down payment when you place your first order.” The company states that this isn’t a fee, but a charge that will be applied to your order.
In comparison, the Fingerhut FreshStart® Credit Account is backed by WebBank and acts as an installment credit program. You’re required to make a $30 down payment on what you want to order. If you make payments on time and in full, Fingerhut promises to change your account to the Revolving Credit Account (and up your credit limit).
You cannot transfer balances or take cash advances from either credit option, and your credit can only be used with Fingerhut.
Who is Being Targeted?
Fingerhut doesn’t require membership, but you do have to apply for their lines of credit before you can shop with them.
The site targets people with no or poor credit who may be declined for lines of credit with other retailers. If you’ve been declined for a store card at your local department store, for example, Fingerhut’s offer may look particularly attractive: you get to finance your purchases even with poor credit.
The main reason people shop with Fingerhut is because the company offers popular, name-brand products and allows you to finance them instead of having to purchase what you’re looking for outright. The site is legitimate from that standpoint – you can charge items to your credit account, they’ll ship after you make a down payment, and then you can repay the balance monthly.
But consumers need to beware before signing up, applying for credit, and heading to the checkout page.
Buyers Need to Beware
Prices of items listed on Fingerhut are considerably higher than other retailers, and there’s little benefit to buying items on the line of credit they offer. Those with bad credit scores won’t see much improvement to that score by using the site, and there’s no reason to attempt to boost your credit score by purchasing material goods from an online retailer.
If consumers need to purchase on credit, they’re often better off charging something to a credit card (or saving up cash to buy what they want). Fingerhut’s prices for the items themselves are higher than in other stores, and their interest rates are often even higher than the rates on credit cards.
And customers aren’t building credit with any company beyond Fingerhut. The site claims that they “can help shoppers build buying power with us,” which is not the same as building credit history. Instead, try building credit history with a secured card.
Choose More Sensible Shopping Alternatives
Fingerhut’s online catalog features a huge variety of items that you can order now and pay for later. But by the time you’ve paid off your purchase, there will be much more cash out of your pocket than necessary. Through Fingerhut, you’ll pay more for your item itself than you would if you purchased at another store – and you’ll pay interest on top of that, too.
If you don’t have the cash in hand today, take a step back and look at your budget to understand why. Are you overspending? Do you really need the item you’re trying to buy, or is an impulse purchase? Is there something else you’d rather do with your hard-earned money than spend on material goods, like saving up for a goal or investing for your future?
If you decide you do want to buy items like the ones you can find on Fingerhut, it still makes sense to choose other alternatives for your shopping needs. In the long run, it’s much cheaper to buy what you’re looking for through other retailers. You can still shop online and get better deals on overall price.
Use coupon sites to look for codes and discounts, and check out online shopping portals like Amazon and eBay to hunt for the best deals. Set up price alerts to be notified when things go on sale and plan purchases carefully to make the most of the money you want to spend.