14 January 2011

Avoid "buy now, pay later" and "6 months, no interest, no payment" schemes

You see them advertised all the time - buy now, no payments for twelve months or six months interest free offers for big ticket items.  If you are clever you can pay it off on time and you have used their money free. But be aware: this is a sales gimmick meant to make the store and finance company money, not you. These offers can end up costing you more than you would have if you paid cash (and don't forget you can always ask for a discount for cash and save even more) and often more than the item is worth.

If you can take the cash you would have used to buy the item and bank it until the payment is due and then pay it off, great. But remember: these offers are extremely dangers because if you miss a payment or can't pay the full balance on time you will get slugged with interest from the date of purchase, often with outrageous interest rates.

Unless you are extremely strong willed and very good at saving, avoid these offers like the plague. Instead work out how long it will take you to buy the item with cash. Then shop around and haggle the best possible deal. It will be well worth the wait.

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