Interest free credit can sound like a fantastic idea. The fact that someone is willing to lend you money for nothing can sound great. This can happen in various circumstances and it is worth being careful in all instances as there is often a catch, as we all know there is no such thing as free money.
Interest Free Credit Card
There are a few things to watch out for with an interest free credit card. Although they can be very good, you do need to be very careful with them. Firstly, they may have a charge for balance transfers so it may not be worth transferring your money across from another credit card to this one as it could end up being more expensive.
Check the figures and costs first. Secondly, once the interest free period ends there will be interest to pay. It is wise to put money aside to pay of the card just before this interest starts so that you do not have to pay it. This interest rate can be higher than on standard cards and so it is worth considering whether it really is worth taking out the interest free card, as you may end up paying more in the long run if you do not pay it off quickly. However, if you are able to pay the card off before the interest period kicks in and get a free balance transfer or just use it for purchases, you could gain a lot from it, particularly if you put the money you would have used to pay off your balance each month into a savings account and get some interest.
Some dealerships will offer interest free credit on cars. This means that you can buy a second hand car, spread the cost over a period of time and not pay any interest. Although this sounds like a really good deal, it is worth making sure that the cost of the cars are not really high as a result. It could be that the dealer adds the cost of the finance into the price of the cars and it could be cheaper to buy elsewhere.
Many catalogues allow you to pay for your purchases over a period of time rather than having to pay for them all at once. This spreads the cost and can make things more affordable. However, it is worth noting that, as with the cars above, the items could be more expensive. It could be better to save up and buy elsewhere, where the prices are lower.
Buy Now Pay Later
There are some shops that offer a buy now pay later scheme and credit cards do the same thing. This means that you get a small amount of interest free borrowing, perhaps a few weeks or maybe longer. Although these mean that you can buy things when you may not be able to afford them and then pay for them when you can, there is a risk. You could find that you will end up spending more than you can afford because you forget that you have to pay for the things later. You may not have as much money as you had predicted you would, when the time comes to pay and you could therefore be in trouble.
With all loans there is a risk that you may not be able to afford to pay off the balance when you need to. An interest free loan can seem even more attractive than other types and you may be tempted to borrow more money than you can afford to repay.
Make sure that you are not just buying things because they are on interest free credit rather than actually buying things that you need. Interest free credit is often used as a way to tempt people to spend more than they can afford so make sure that you do not fall for this. It is worth making sure that you are aware of how much you will need to repay and when you will need to pay it so that you can be sure that you will have enough money to be able to do so. Also make sure that you are getting the best value for money and are not overpaying for what you are buying.