As shopping traps go, long-term payment deals are as bad as they get. They can cost you hundreds of dollars in fees alone, even if you pay everything off within the interest-free period.
This article examines:
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CHOICE recently researched and shadow shopped some interest-free payment offers available with major retailers, and calculated that the fees you’d pay for them range from 22.3% up to 87.6% of the minimum purchase price.
So, for example, a $549.95 Braun shaver could cost you close to $700 with a David Jones three-year, interest-free offer if you pay for it using the retailer’s own StoreCard – and almost $1000 if you use the Amex David Jones card.
We also found a no-deposit, four-years-to-pay offer that charges not only $220 in fees but also 26% interest from day one. See, How they work to learn more about these figures.
Counting the cost
About 1.3 million Australian consumers used GE Capital interest-free offers over the past five years. While most paid off their purchase within the interest-free period, almost one in three paid interest.
Depending on the product they used, the rates ranged up to almost 30%.
Take a look at our infographic, to find out how we calculated the real cost of these interest-free offers.
Misled at point of sale?
A CHOICE shadow shop of major retailers offering interest-free deals in early November revealed a lack of proper disclosure. Salespeople in five of the six stores gave incomplete or wrong information about details such as interest rates, fees and conditions.
It turns out retailers are exempt from some important licensing requirements imposed on the credit providers whose products they represent.
CHOICE thinks this loophole can cause consumers to be misinformed about the credit deals they are signing up for and we would support an official review of the exemption. For the full story, see our report.