Is Interest Free Really Interest Free?
1 Dec 2015
We see it advertised everywhere around us - buy now, pay later, no interest. So what are the pitfalls?
Before you get too worried, there's nothing wrong with making purchases on interest free terms -you just need to make sure that you completely understand the finer details.
There are credit and store cards that have the ability for you to make multiple purchases from different stores, all that have individual terms and interest rates applying. For example, one purchase could be interest free for 6 months, while another purchase could initially be interest free with deferred payments (payments to be started in thefuture, on an agreed-upon date). Both purchases will start to be charged interest at some date in the future if the purchase isn't completely paid off beforehand. With only 2 purchases it can be confusing, imagine 10 purchases you are trying to manage and pay off before the interest kicks in.
So, here are a few things to keep in mind before you commit to interest free offers:
- Read the Terms and Conditions - When does interest kick in? What is the interest rate?
- Take a look at the establishment and administration fees - sometimes, they can be more than you think!
- Double check any fees that can be charged - Is there a monthly fee? Is there a fee to pay it off earlier?
Once you have figured out when the interest is to be charged, you may consider consolidating some of your debt on your credit/store cards in to a personal loan just before the interest kicks in. The upside of consolidating is that you only need to remember to make one regular payment, rather than three or four, and you may even be able to snag a lower interest rate. Success!!
It can take a little bit of time, but there is a definite bonus to keeping your finances in order - you won't be surprised. Now, I do enjoy surprises, but not when it's in the form of more debt!
Stay safe out there!
Talk soon . . .