An offer of "no interest, no payments until 20xx" on everything from electronic gear to eye surgery sounds great, but they are not for everyone and they are not always as free as they say.
The fine print is the key. Read it very carefully. You will find out what the hidden interest rate will be if you do not pay the entire balance before the promotional offer expires.
These deals look great but they could be a time bomb just waiting to explode. If you buy $5,000 worth of electronics and pay off all but $200.00 before the promotional period ends, you will be stuck with hundreds of dollars of retroactive interest. We are talking about all the way back to the day you made the purchase. That is when 0% financing is not free.
According to the Better Business Bureau, be careful what you give up. For example, 0% financing on a computer may put you into an installment loan provided by the manufacturer and prevent you from putting the purchase on your credit card. As a result, you surrender important rights to dispute the charge if the computer is defective.
That's not all. The promotion usually requires you to open an account with a credit limit at the product's purchase amount. Now you have a brand new credit account that is already pushing against the upper limit of your line of credit.
Important Tip: To raise your credit score, keep your utilization ratio at less than 25% or 35% of available credit.
Pay attention. The due date on your statement may be different from the original maturity date on the 0% promotion. If you do not pay attention to the dates, your payment may be received on time, but it may be received too late for the promotional offer which will result in retroactive interest charges that you had carefully planned to avoid.
Last but not least, if you do not think you can afford to pay off the balance before the promotional time ends, consider other financing options such as a short-term loan with the credit union that will charge a lower interest rate.
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