Credit rules will also cover retailers' offers

For years, phrases such as "no money down" and "90 days, same as cash" seemed as American as anything in the Declaration of Independence - life, liberty and the pursuit of an HDTV, with no payments for 12 months.

But no more.

A slew of new rules regarding consumer credit are kicking into effect this year, and they'll likely turn inside out many of the deals that retail stores have offered for years. "Same as cash" deals or discounts for opening store credit cards are disappearing fast. Thankfully, so are high-interest bait-and-switch schemes and many "gotcha" penalties.

Here's why.

In the worst stage of the recession, Congress passed a slew of new rules in response to credit card companies that were suddenly jacking up interest rates or dumping even customers who never missed a payment.

Turns out, those credit card rules will also apply to credit deals people sign in retail stores for furniture, jewelry, electronics and appliances. That's because when you sign one of those deals, what you're really applying for is a credit card, without actually getting the plastic card.

Already, some stores are shifting how they handle credit. Target, for instance, is ending the practice of offering a 10 percent discount at the cash register if shoppers open a Target REDcard. Instead, Target will give 5 percent off to existing cardholders.

There are a lot of changes coming. Here are some that affect most shoppers.

Goodbye '90 days' deals

Before, retailers could offer a three-month, same-as-cash deal. No longer.

Now, any credit deals must last longer than six months. This is a side effect from reforming the broader credit card market. The idea was to prevent credit card companies from offering yearlong promotional deals such as zero-interest balance transfers, then dinging customers with penalties if they missed a single payment in the second month.

The new rules require any deals to last longer than six months. Because the rules apply to consumer credit generally, those will apply to retailer credit, too.

Beware of deferred payments

Consumer advocates say to beware of offers that promise "no payments" or "no interest" for a period of time.

The law still allows retailers to offer deals that put off payments, but those deals can be a huge pitfall because the interest really isn't zero. It's just deferred, and the real rates can be well over 20 percent.

For instance, the National Consumer Law Center lays out this scenario. Say you buy a $2,500 TV on Dec. 22 with a one-year no-payment deal. Over time, you pay off $2,000. But on Dec. 23, 2011, the retailer can charge interest retroactively on the entire $2,500 over those 12 months - not just the $500 you have left to pay.

"I've yet to meet consumer who really understood that if they don't pay it all off during the free period that they'll be socked with a retroactive interest charge," said Ben Woolsey, director of marketing at Credit Cards.com. That $2,500 TV could cost a lot more than if you had paid cash.

If the deal is 12 months, make sure you pay before the year is up.

No more sudden rate increases

Under the new rules, credit card companies (and the retailers who offer credit deals) can't penalize customers with a much higher rate just for being a couple days late with a monthly payment.

That rule would apply to deals in which you make a monthly payment, Woolsey said. So if you get a $1,000 refrigerator, and you miss the third month's payment by a few days, the retailer can't suddenly kick in a 25 percent interest rate charge on the entire balance.

As of February, customers must be at least 60 days late before a new rate can kick in, and there should be more warnings in the mail before the rates change.

Helping you pay off your bill

The new rules also mean your payments must apply to the highest rate first.

Say you take out a one-year "deferred interest" card from a home store to buy a $1,000 refrigerator with an interest rate of 20 percent.

A few weeks after buying the fridge, you charge a $500 barbecue grill, which comes with a more manageable 10 percent interest rate. In the past, a store could dump your payments toward the grill, not the fridge, and sock you with a penalty for not paying off the fridge in time.

As of February, though, the home store must first apply your monthly payment to the minimum balance owed. Then, any extra money goes first to the item with the highest rate - in this case, the fridge. In the last two months of the payment deal, any money paid beyond the minimum would go to that fridge.

If you don't like that arrangement, you're supposed to be able to call the store and say how to apply the payment.

Changes at the store

The practical effect of all these changes are starting to kick in at the retail level, Woosley said.

Retailers are starting to phase out no-payment deals and instead offer deals that require minimum payments.

Furniture retailer Rooms To Go has already phased in some changes, said CEO Jeff Seaman.

"Before, if a customer didn't want to make any payments for a set time, then they didn't have to," Seaman said. "We had always offered no-payment deals, and a lot of people took it."

Now, customers can still finance without interest stacking up, Seaman said. But deals more often come with a monthly payment.

About half of Rooms To Go's customers take financing of some sort, Seaman said. So the changes are significant. Already, advertisements are being redesigned to include more disclosures, Seaman said.

These new rules will mean more fine print and will force retailers to change advertisements and present more disclaimers and details about credit offers. That's not a bad thing, said Seaman. "It really puts in the consumer's face what the rules are."