March 2000 Volume 81 Number 3 "serving the protectors"
Police Credit Union

Buyers Beware
Interest Free - Pitfalls & Traps

verywhere you look these days you can see “Interest Free”

To make sure these offers work to your advantage you need to be aware of what you are locking yourself into.

The important thing to realize is that you are actually purchasing these goods on credit and the finance is being provided by a finance company, so it is imperative that you fully understand the terms and conditions being offered to you.

Before the finance is provided, you will be asked to complete an application, which is then assessed by the credit provider. You will be listed with a credit-reporting agency as having applied for this credit, often without you realizing that you have given permission for this to happen. If your application is approved you will sign a contract and receive the goods. Occasionally, approval will be given before you have left the store.

You must then be very disciplined in paying off this credit in the allotted “interest free” period. If you are able to accomplish this, then it can be considered a good deal, however, if you are unable to, then the interest - often in excess of 25% p.a. - will commence.

There are several options to this, and at worst, you can be charged interest from the commencement date of your contract. Even though you may have paid as much as 75% of your debt.

So, there are some very important points to raise with the store offering its interest free credit before signing on the dotted line:

• Can I make extra repayments during the interest free period?
• When interest is calculated, how is it calculated - on the whole amount or on the outstanding balance; from the date of signing or from the end of the interest free period?
• What will the interest rate be at the end of the interest free period?
• Who is providing the finance? Is it a reputable and well-known credit provider?
• How will any dispute be arbitrated or resolved?

Lastly, if you find yourself unable to completely pay off the debt during the interest free period, then look to refinance with another credit provider at a lower interest rate before the commencement of interest charges.

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