Why You Should Think Twice About ‘Buy Now, Pay Interest Later’ Deals

by Herb Weisbaum, Today

dave416 / Flickr

dave416 / Flickr

It’s hard to stick to a budget this time of year. One big-ticket item can spell disaster.

You know you can’t really afford that big screen TV or new sofa, but you really want it. All you need is a little convincing. That’s why so many stores offer special “deferred financing” during the holiday shopping season. They hope their “buy now and pay no interest for 12 months” promotion will encourage you to go for it.

Personal finance experts don’t have much positive to say about these offers.

“People often get emotionally involved in that purchase and make a short-term decision that can have long-term consequences,” said Gail Cunningham, spokesperson for the National Foundation for Credit Counseling.

Deferred financing plans can come back to bite you if you don’t understand how the program works and follow all the rules.

In most cases, you’ll be required to make a minimum payment each month and have the balance paid off by the end of the promotional period.

Miss a payment or owe any money when that grace period ends and you’ll pay interest – typically 22 to 29 percent – on the full amount of the purchase, no matter how much of that balance you’ve already paid off. It’s like the special offer never existed.

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