04.Interest-free vs credit cards
There is one circumstance in which an interest-free offer may make sense, and that’s when your only other option is to pay off the item over time using your credit card. Our comparison shows that even when you use a credit card with a low interest rate of 10.99%, it can be cheaper to use an interest-free offer for an expensive item.
If you’re able to pay off the amount over a shorter period or are buying a lower-cost item, using a low-interest credit card can be the better option. But the interest-free deal is usually a better deal than a high-interest credit card.
No deposit and $$$ to pay
“NO DEPOSIT & 4 YEARS TO PAY” said a recent promotion by an electronics retailer. An interest-free deal? No, a four year repayment period with interest charged at 26% from day one using a credit line with HSBC! According to HSBC, the $3238 TV would actually cost you $5182, including $1723 interest and $220 fees.
We think the confusing character of this promotion is borderline unethical. Especially with these kinds of dealer which can be detrimental for vulnerable consumers, salespeople should be required to give you details about the fees and interest which apply.
Retailers are currently exempt from licensing which is usually required for anyone who provides credit and means they only have to give you a document which explains where to complain about them.