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Check on credit deals

CONSUMERS need to be wary of terms and conditions on interest-free loans and low-credit deals, according to the Australian Securities and Investments Commission.
ASIC deputy executive director of consumer protection Delia Rickard fears many Australians will accumulate debts they can't afford while interest-free purchases and low-interest credit offers are popular, they don't suit everyone.
"Short-term benefits may be good, but consumers also need to consider the longterm costs of these kinds of offers, particularly ongoing fees and potentially high interest rates.
"Promotional credit offers may encourage you to buy more than you can afford, and if you get into financial difficulty down the track and cannot payoff your purchases within the interest-free period, you could find yourself in hot water," she says.
"Spend time checking the fine print and you're likely to find that many of the low or no-interest credit deals on the market are not that advantageous.
"While bonus credit may be interest-free, these loans contain fees and charges and remain very expensive forms of credit.
"The bottom line is that interest-free terms and low-interest credit offers are not designed to help you save, they encourage you to spend more," MRs Rickard says.
Interest-free terms are offered by many department stores on purchases made with store credit cards for up to 48 months, but they may also charge establishment fees, often around $25, as well as monthly transaction fees, typically at around $2.95.
"It's also worth noting that purchases under $1000 are disproportionately affected by these establishment fees and monthly fees. When added to the price of purchase, fees imposed for interest-free terms may equate to a much higher rate of interest on the purchase than if a standard credit card was used - possibly in excess of 20 per cent," Mrs Rickard says.
Mrs Rickard reminds consumers that purchases not paid off within the interest-free period attract very high rates of interest, sometimes as much as 27.99 per cent compared with the interest rates on standard credit cards of between 10-19 per cent.
ASIC also suggests consumers be wary of "cash back" credit card offers and low-interest balance transfers.
Cash-back benefits may be outweighed by extra interest charges if the card offering the cash back has a higher than usual interest rate.
This is particularly applicable to consumers who don't pay the whole balance off each month.
"Consumers who don't pay their credit cards off in full each month are generally better off having a low-interest credit card," Mrs Rickard says. "Extra features that come at the cost of higher interest rates are generally not worth it."