Interest-Free Credit

Unfortunately, there is no such thing as 'free credit', and you will almost always end up paying for it in one way or another:

• The cost the free credit may be put onto the price of the goods.
• You will be charged a large financial penalty if you fail to start paying when the buy-now-pay-later period ends. In some cases, the reminder is sent out only after the first payment is overdue.
• If the 'free credit' is for a limited period, you often end up paying a much higher rate of interest than the market rate when you do start paying.
• There may be penalties for early repayment so you have to pay the higher rates for a fixed period even if you can afford to pay off the loan.

You can avoid these traps by paying in cash and asking for a discount instead of 'free credit'. However, you will often find that there aren't many people willing to take you up on this offer - sales associates in stores offering these types of deal often receive a small basic salary, and make most of their income by selling credit agreements and insurance contracts for after sales maintenance and breakdowns.

However, if you do decide to go for the free credit, read the small print very carefully, and work out what the real cost of the payments of the 'free credit' deal are. Then see if you can get cheaper credit elsewhere - perhaps from a personal loan.