CASH-strapped shoppers looking to buy big-ticket items via “interest-free” in-store finance offers need to understand the traps involved before signing the dotted line.
While some deals include zero interest charges, no deposit and no payments, it sometimes can be too good to be true.
Consumers need to drill down into the offer’s detail to work out if they are actually scoring themselves a competitive deal.
Here’s some good advice before you hit the shops:
READ THE FINE PRINT
In-store finance is usually linked to a credit card that has multiple terms and conditions that you need to understand before signing up.
Before you drive away with that TV, fridge or dishwasher in tow make sure you have examined the fine print and be sure to ask questions.
Sometimes the shop assistant may not be trained to understand the finance arrangements so ask for the credit provider’s contact number so you can phone them up and ask any questions you may have.
If you plan on using in-store finance retailers will have a minimum amount that you must spend in order to be eligible for this deal.
This will vary from among stores and usually starts around the $1000 mark.
Be mindful that you run the risk of missing out on sale prices if you pay using finance.
Just to get the account kick-started there’s often an establishment fee which can be around $25.
On top of that there’s usually account-keeping fees of about $5 per month for as long as it takes to you to pay for the item in full.
On a 50-month interest-free deal this quickly adds up to $275 which includes the monthly $5 account-keeping costs and the one-off $25 establishment charge.
This is where you need to pay the most attention. Some deals allow consumers to forgo making any repayments throughout the interest-free term, however there is a big trap at the end.
Whatever is owing on the account once this period is up reverts to a high interest rate which can sting you by up to 30 per cent.
This is where the credit provider makes the most money, so play it smart and work out a diligent payment plan to ensure you maximise the interest-free period and pay off the item in full.
Source: The Courier Mail’s Money Saver HQ
Retailers are pretty good at trying to tempt you to spend money you don’t have, and interest free finance is one of the tricks up their sleeve. Here’s a good quote I like to use…
“Don’t buy things you don’t need with money you don’t have, to either impress others or to satisfy your desire for happiness.”
Jason Thomson | Finance Broker and Mortgage Adviser | Smartline Cairns