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Is No-Interest In Your Best Interest

   So you’re feeling depressed because you really want and need that big screen television and sleeper sofa today, but you know it’s going to be a few months before you can really afford it.        

    But wait! You can have it all right now and delay payments and interest for six months, according to the commercial you just saw on your fuzzy television screen.

    What a deal! You can lock in today’s prices and pay with future income. Your old accounting professor would be proud.

    No-payments, no-interest advertising is continuing to increase in popularity among retailers. However, the “deal of a lifetime” may not necessarily be in your best interest.   

    What some retailers bury in the fine print is the fact that most require you to pay the entire balance at the conclusion of the “free” period in order to waive the interest fees.   

    However well-intentioned consumers may be when they purchase items on these terms, they often end up carrying the balance and paying the retroactive interest covering the entire “free” period. According to a study by the Texas Attorney General (AG), one-half to two-thirds of consumers making purchases on these terms did carry a balance.   

    Typically consumers are required to apply for a retail credit card to qualify for these offers. The interest is often in the range of an 18 - 21 annual percentage rate on these cards and can add up if consumers carry a balance.

    The Texas AG along with several other states recently reached a voluntary agreement with four major retailers to clarify their “no-interest” print advertising. Best Buy Corp., CompUSA, Montgomery Ward & Co. and Tandy Corp. (Radio Shack, Computer City and McDuff) all signed the agreement but Circuit City declined.

    Despite these efforts, the Better Business Bureau’s (BBB) Advertising Review department reports the continued popularity of “no-interest” advertising among retailers. “The AG’s agreement focused on electronics retailers but this type of advertising has spread to other industries as well, said Alison Harbin, former BBB Advertising Review Coordinator.    The BBB warns consumers to always read the fine print regardless of what an advertising banner proclaims or salesperson says. The Bureau offers the free Advertising Review Handbook to help companies construct clear and accurate advertising. Call (713) 868-9500 for a free copy.