‘No interest’ store loans
The real story behind no interest store loans
There’s an old saying and it goes something like this, if it sounds too good to be true…it probably is. And so it is with these ads you will be very familiar with if you watch more than 20 minutes of television a week.
It’s often around the festive season that those annoying loud ads appear on the box offering 48 months interest free, when you purchase something very expensive off that business, like a fancy 4D TV or an enormous fridge you probably don’t need.
Retailers seem to be constantly outdoing themselves by offering longerinterest free periods to shoppers looking for hassle free big purchases. However there are big catches to these supposed easy interest free loans.
48 months interest free always sounds tempting when you’ve got a lot of spending to do but one study found 30% of customers said the salesperson had not even explained that they would be charged interest once the interest-free period ended, while less than a third read the paperwork in detail.
Fees, Fees, Fees
Customers particularly were not aware of the fees, commitments, extra charges and the interest-free period expiry date. This is where interest-free services become less enticing. “Interest free” is only available for the life of the loan. You have the flexibility to pay for your purchases with low weekly repayments and offset interest, but the fine print can sting if you don’t tread carefully.
Making late payments with most of these interest free store cards incurs a penalty fee, as can early payments so use your interest-free store card or interest free loan on purchases wisely and form a personal payment schedule to pay off the entire debt by the interest-free expiry period so you won’t be subject to any nasty surprises.
A recent and increasingly popular “buy now pay later” option is Afterpay, but it too has a high interest downside if you don’t pay the full amount by the due date.
Check out what our friends at Choice say about the pros and cons of this new form of quick credit HERE.
If you think you have been wrongly charged or misled make a consumer complaint.