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Sunday, 18 November 2007

Buy Now, Pay through the Nose Later

HSBC sent me a "special offer" in the post yesterday. If I use my credit card to buy a large consumer item from a major retail chain (they suggest a home theatre system as an example) I will get it "interest free" for 56 months! Now, there's nothing wrong with this offer IF a) you were intending to buy this item anyhow, b) you had the cash lined up to pay for it, and c) you invest that cash in the meantime and have it ready to pay off the purchase amount in full when it falls due in five years time....

BUT, I'm sure a lot of people who accept this offer can't really afford it, and will have been tempted to buy something they would have thought twice about if they had to start paying it off straight away. After all, five years before payment is due seems like an eternity. They probably only worry about making the minimum monthly payments, and won't think about the debt until it falls due in five years time. By then the home theatre will be outdated and worth practically nothing second hand. If they aren't in a position to pay it off in full at that time, the fine print states that the amount will then be treated as a cash advance and be charged 20.99% interest!

Copyright Enough Wealth 2007

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