Understanding Interest Free Deals – Are They Worth It
Deal or no deal
There are many stores that offer interest-free deals that allow you to take goods home before you pay for them. But interest-free doesn’t mean cost-free. There are always fees and charges, and we’re going to discuss them:
- How interest-free deals work
- How to make the most of an interest-free deal
- Buy now, pay later payment services
- Interest-free travel deals
- No interest ever deals
- Check your other payment options
How interest-free deals work
There are two ways you can make payments on interest-free deals:
- Installments- making standard monthly payments.
- Deferred payments- you don’t make payments until the end of the interest-free period.
Before you elect to take part in an interest-free deal, you need to know that:
- If you only ever make the minimum payment, you won’t be able to pay off your balance in full within the interest-free period.
- The interest rate you’ll incur if you miss a payment or haven’t paid off the balance by the end of the interest-free period can be as high as 29%, which is much higher than most credit cards.
How to make the most of an interest-free deal
Here are some tips on how to make the most of an interest-free deal:
- Work out your payments- make sure you check the fine print and only get an interest-free deal as long as the contract permits you to pay more than the minimum monthly payment. Use a interest-free deal calculator to determine how much to pay each month to avoid paying any interest.
- If you can’t afford the payments, don’t agree to the deal. Sometimes people think if they can just make the minimum payments at this moment, that their situation will improve and they will add to their payments later. This has the potential to add to their debt and stress.
- Multiple deals- if you have more than one interest-free deal on your account, figure out how additional repayments are allocated so you can make sure you have each one paid off within that interest-free period.
- Don’t use a credit card- You might want to use a credit card that comes with the deal, but it likely has a high interest rate, your purchases may not be interest free, and it may be difficult to figure out when balance is paid into first.
- Check charges and fees- even when an ad says “no deposit, no interest, nothing to pay,” you still may find yourself having to pay fees, like application fees, monthly account fees, and payment processing fees. These will all be listed on your credit contract, so be sure to review it with a fine-toothed comb.
- Monitor and review your account- upon receipt of your statement, check the expiration date on your interest-free period and make sure you are paying enough to have it completely paid off before the end.
Buy now, pay later payment services
Buy now pay later services like QVC allow you to order or purchase a product immediately and delay payment. You then pay off the product in installments over the course of sever weeks, or a few months.
Interest-free travel deals
Some travel companies will encourage you to book a “once in a lifetime” trip, even if you can’t afford it, through interest-free travel incentives.
There are two kinds of interest-free travel deals:
Pay before you go on vacation
You book your trip ahead securing your fares and various costs, and then pay it off with regular monthly payments before you travel. You will incur an up-front fee and, if you miss a payment, your trip could be cancelled and any payments you have made used to pay cancellation fees before you are refunded your balance.
Vacation now, pay later
With his deals, you start making regular payments now and continue to pay off the trip after you return home. There’s an interest-free period but, when that’s over, you’ll be charged high interest on the balance.
to work out how much you would need to pay each month to pay off the trip before leaving home. If you can’t make the repayments, delay your trip until you’ve saved enough to afford it, or vacation somewhere cheaper.
No interest ever deals
With no interest every deals, the payments are high enough to repay the debt over the term of the loan. The deals typically have costly payment processing fees and monthly account fees.
While you won’t pay interest on the debt, you can be penalized with high default fees if you don’t make all your payments on time.
Check your other payment options
Don’t feel obligated to sign up for an interest-free deal by a pushy salesperson or a limited time offer. Consider some other options:
- Use your savings- try a savings goals calculator to help you determine how much you need to save.
- Layaway- You won’t have the ability to bring the item home right away, but you’ll be paying on the item without accruing interest, either.
Interest-free deals can be awesome if you pay them off during the interest-free period. But if you don’t, you’ll be hit with extra interest and fees.