The opportunity to purchase large ticket items such as furniture and white goods with an interest free credit card seem so easy and a good choice for many consumers. After all, why pay the purchase price upfront when the repayments could be spread over 12, 24 or 36 months interest free?
However, some consumers are unaware of the hidden fees associated with such a scheme and in the end, as a result of being ill informed, are finding that the debt is being consolidated some years down the track to other debt facilities.
Be sure to research the following factors thoroughly when considering entering into a purchase with an interest free credit card. Reality is that nothing is ever interest free. Remember- Money always comes at a cost regardless of where it comes from. Control the urge to use these interest free credit cards for anything other than the product which is being purchased interest free.
Credit Card Fees
Credit facilities such as interest free deals generally incur an establishment fee and an ongoing regular monthly account keeping fee, so add this to the purchase price as these fees are unavoidable.
Credit Card RepaymentsThe repayments invoiced in the monthly statement is always lower than the amount required to actually pay off the loan by the end of the interest free period. So always pay the calculated amount which would clear the debt in time. This is calculated by the following:
Purchase Price Plus Establishment Fees Plus Account Keeping Fees
Divided By
The Number of Months in the Interest Free Period
Interest Rate After Interest Free Period on Credit Card Debt
The interest rate applied to any remaining debt at the of the interest free period is often double or triple what other credit providers would charge at the time. It could also be changed as central bank rates change with little notice.
Access Cards and Large Credit Limit
A credit card is also given to the consumer entering the interest free contract. This card also comes with a pin for even easier access to additional funds but be wary of hidden costs. The interest rate and fees for cash advances and other purchases are not included under the interest free scheme and often, an astronomical interest rate is applied from the date of the cash withdrawal or additional purchases.
Best Purchase Price or Best Credit Card?
Always carefully and thoroughly research the purchase price of the product. Products offered under interest free schemes are rarely sale items and can often be purchased cheaper elsewhere. By the time the unavoidable establishment fees and account keeping fees are added to the asking price, it is unlikely the deal is a good one.
Interest Free Credit Card Debt Management
Tear up the access card and the pin when it comes in the mail.
Make repayments each month which will repay the debt prior to the end of the interest free period regardless of what the minimum repayment is as required on the statement.
In conclusion, the ease of access, additional credit card fees, and excessively high interest rates offered to consumers who would not otherwise be able to finance such a purchase, may seem to present these facilities as a form of predatory lending. So be sensible and well informed when considering interest free credit cards.
In the long run it may be better to use second hand items for longer or employ good money management strategies for those larger items.
Remember also to provide details of identification to reputable companies only. Find out how to Prevent Identity Theft .
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