Zero interest finance plans — Are they worth it?

If you’ve been shopping recently, it’s likely you have seen those “zero interest deals” on big ticket items such as furniture, appliances or jewelry. These offers have been increasing among retailers, with many consumers choosing this option for big purchases. Even some medical offices offer zero interest plans. It seems enticing, but is it too good to be true?

If you’ve been shopping recently, it’s likely you have seen those “zero interest deals” on big ticket items such as furniture, appliances or jewelry. These offers have been increasing among retailers, with many consumers choosing this option for big purchases. Even some medical offices offer zero interest plans. It seems enticing, but is it too good to be true?

What many people don’t realize is that it can actually cost you a lot in the long run if you aren’t careful. When considering zero interest financing, it’s important to read the fine print and know exactly how it works.

With this type of offer, a consumer has a period, typically six to 18 months, to pay off a purchase in full without paying interest. Follow the terms exactly as outlined and you won’t pay interest. However, buyers should understand the zero interest transaction is not guaranteed.

These plans are really deferred interest plans. This means that interest is actually accruing, often as high as 25 percent, and can come due if any of the terms are not met.

For example, if you make a late payment or miss a payment, the accumulating interest being deferred will be subject to payment. Even owing the slightest balance at the end of the term will cause the accrued interest to be added to your balance. That means you will ultimately pay much more than you intended. Consumers often end up owing hundreds of dollars in interest because they don’t fully understand the complex and confusing terms of a zero interest offer.

Borrowers accept these plans with every intention of paying off the balance within the agreed upon terms. However, life happens. Job loss or unexpected expenses can occur, and suddenly it’s harder to make that payment, resulting in a much higher price when the retroactive interest is added.

Be cautious when considering a zero interest plan. Safer, alternative options are saving up for your purchase, or using a lower-interest credit card.

If you have a deferred interest balance coming due soon that won’t be paid off within the specified term, call TFCU at (405) 732-0324 or 1-800-456-4828. See how we can help.

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