Just Say “NO” to “No interest, no payments.”
You’ve probably heard the pitch. “Buy now and there will be no interest and no payments until 2011!” It sounds like a great deal. You’re able to buy the item you want for a good price and will not have to pay for it until 2011, right? Well, that’s not exactly the case, although retailers like Circuit City and Best Buy would have you believe it. No interest, no payment deals aren’t all they’re cracked up to be. In fact, they can be downright damaging to a person’s credit because people who take advantage of these deals rarely know what they are in for. And what they are in for is a bumpy, credit damaging ride.

“No Interest” doesn’t always mean no interest

One of the most appealing parts of the advertisement is that you can buy your item with zero interest. This leads many to believe that interest will not accumulate on the item until the non-payment period is over. However, that’s not true. Interest typically will begin accumulating on the item from the time it is purchased. Often, this interest is quite high (greater than 20%). When people get the first bill, they are shocked to see how much interest they will be paying back on the item, as well as the cost of the item.

It’s a sad but true fact that those who use the no interest, no payment deals are forced to pay back a lot more than they originally bargained for.

Late payments add up

With some no payment, no interest deals, you won’t have to pay interest right from the beginning (instead, you will have to pay interest once the payment period begins). However, there is an exception to this. You see, if you make just one payment late, you will be forced to pay interest on the item right from the date of purchase. Depending on how much the item cost, this could turn out to be an extra $1000 dollars that you weren’t expecting to pay.

The worst thing, besides paying a bunch of interest, is that late payments on the no payment, no interest deals can severely strain your credit. In some cases, even one or two late payments can lead to a collection agency being called in to demand all the money from you. This can put undue stress on you, which is why deals like these just plain hurt.

There’s always a catch

No interest, no payment plans are so appealing to people because they allow us to buy things that we wouldn’t otherwise be able to afford. But just like anything else that seems too good to be true, there is always a catch with these deals. This catch is never found out by the consumer until it is too late and their credit is already damaged.

The fact is, for the retailers who offer the no interest, no payment plans, it would be bad business to tell customers about the “the catch”. The catch is typically that we have to pay more money back than we ever thought possible. Or it could be something else, such as an extremely high interest rate.

Quick repayment

It seems like you have a long time before you must pay the money back. All the no interest, no payment deals proudly boast that you don’t have to make payments until 2008 or 2009. While that might be true, you often have little to no time to actually pay for the item. For instance, if a deal states no payments until 2008, you may just have to pay for the item by February or March of 2008. That’s a lot sooner than you thought, right? It’s something that retailers will fail to tell you until it’s time to begin making payments.

I really want this

Perhaps you cannot afford the item presently but desperately need it. In most cases, it isn’t a life or death item, but is instead something you feel you need. Before making the purchase, the smart thing to do would be to re-evaluate the situation. Ask yourself the following questions:

• Can I wait for this until I can pay by check or cash?
• Will I be able to afford the item then?
• Can I afford to pay for the item, even if there is high interest?
• Is the item really worth the trouble of signing up for a no interest, no payment deal?

Most likely, you’ll decide (after thinking about these questions) that you really do not need the item and can wait. However, if you decide to still go ahead with a no payment, no interest deal, it is a great idea for you to inform yourself about the deal at hand.

When you walk into the store, you should have a set list of questions to ask the salesperson regarding the no interest, no payment deal. These may include:

• When does interest begin accumulating on the item?
• When, exactly, will I have to begin paying for the item?
• What will the interest rate be?
• What are the penalties for late payments?
• How long will I have to pay for the item?
• Approximately what will be the monthly payment?
• Can we go over the terms of the contract I will be signing?

Salespeople will usually cheerfully answer these questions for you simply because they don’t want to lose your potential business. If they won’t answer the questions to your satisfaction, ask to speak to their manager. It’s extremely crucial to get all the facts before entering into a potentially credit damaging deal.

I’ve already signed up for this

If you’re already signed up for a no interest, no payment deal, the information above may not be as helpful for you. However, there are still things that you can do to prevent a disaster from occurring.

The first is to make sure that you make payments on time. Pay at least the minimum. If you can, pay more than the minimum so that you can get the item paid for as quickly as possible.

Ask for a copy of the agreement which you signed. Keep an eye on the agreement and if the retailer appears to have gone against the agreement in anyway,