Home Depot Credit Card Review: Worth It?

Before you start your next home improvement project, read on to find out whether you should apply for a Home Depot credit card. The fine print may surprise you.

If you're a homeowner, chances are you're intimately familiar with your local Home Depot. It can become the weekend destination of choice for anyone looking to spruce up their walls with a fresh coat of paint, add some color to their garden with some new flowers, or finally repair that leaky faucet. All those visits can add up to a hefty tab if you were to put it on a credit card. Like most retailers, Home Depot hopes that you will rack up a tab - on its own branded card. The card comes with an interesting perk, but would the benefits outweigh its cons?

© Robert S. Donovan (CC BY 2.0) via Flickr

Why Get a Home Depot Credit Card: Benefits

The major draw of this card is that there is no interest if paid in full within 6 months for any purchase of $299 or more. For cardholders who pay off the balance on these purchases before the end of the six-month period, the card effectively functions as an interest-free, short-term loan.

Another benefit is you could use the card as a handy way to keep your home-improvement expenses separate from your other purchases, assuming you restrict such spending to Home Depot. You may have a need to do this if it helps you for budgeting purposes.

Disadvantages

• Interest rates: The interest rate on the Home Depot credit card is technically a variable rate between 17.99% and 26.99% depending on your creditworthiness, but 3 out of the 4 tiers are over 21% (21.99%, 25.99%, 26.99%). That's well toward the high end of the typical credit card interest rate spectrum.

• Penalties: If you fail to pay off the entire balance before the six-month period on interest expires, you'll have to pay all of the interest that accumulated during that time on the entire original balance. This means you will be paying interest even on the portion of your debt that you already paid off. The caveat of the promotional period is different than regular credit cards that offer 0% APR for a few months - if you still have a balance after those introductory periods end, you pay interest only on your outstanding balance.

• No Flexibility: The Home Depot Card is a store card, so it can only be used at Home Depot.

Who It's Best For

Home Depot © Mike Mozart (CC BY 2.0) via Flickr

A six-month interest free period is a great perk only if you can, in fact, pay off your balance during that time frame. If you forget or get into financial trouble and have a hard time paying off your initial Home Depot purchase, the reprieve the store gave you will be moot and you'll be saddled with high interest charges that have multiplied over half a year. For homeowners who are undertaking home improvement projects and need a couple of months to accumulate enough cash to pay for them, the card could be a great option as long as they're committed to being vigilant about paying off the balance in full and on time.

Alternatives

Home Depot offers another card aimed at homeowners who need credit for a big renovation, like the kitchen. Called the Home Depot Project Loan, the card can provide you coverage for up to $40,000 in purchases that you make within a six-month period, with a fixed 7.99% APR. Consumers have to make interest-only payments for those first six months and then have to pay everything back over 84 months (seven years). You get better terms on a car loan, but if you absolutely need renovation funds and have trouble getting a home equity loan, this is a potential option.

A more flexible and manageable solution for your home improvement credit needs could be a credit card with low interest rates. Many offer an introductory period of 0% APR. Another option is a rewards credit card; some cards offer extra cash back on purchases at home improvement stores during certain times of the year. If you can time your purchases just right, you can get something in return for your spending.