If installment payments in the run-up to Christmas are tempting, caution is advised. Ultimately, partial payment mail order shopping is very expensive. The effective interest rate is between zero and 21.7 percent.
The ‘pitfalls’ are often hidden in the small print. This is evident from an AK sample among three mail order companies and five other companies with installment purchase offers.
“The offers sound tempting. Be careful, read the fine print so you don’t get a rude awakening,” warns AK consumer advocate Christian Prantner.
Zero percent financing is often accompanied by conditions
“Zero percent financing is often linked to conditions or special promotions. It also sounds tempting when mail order companies advertise rates of around 1.65 percent per month. That doesn’t seem like much, but on an annual basis it is very expensive. Or the interest rates are described as ‘safe, flexible, simple’ and ‘no borrowing costs’ or ‘no processing and account management fees’.
Prantner advises: “Pay attention to expensive insurance packages, the effective interest rate and the sum of all installment payments, or the total amount.”
- Negotiate negative interest on the account: Ask your bank what the overdraft interest rate is on your checking account and whether the interest rate is fixed or variable. Negotiate the overdraft interest rate. There is some room: personal creditworthiness, long-term customer loyalty and negotiation skills are crucial. Many banks offer employees of certain companies special conditions for interest and costs.
- Consider debt restructuring: If you are overdrawn for a long time, consider refinancing your debt into a personal loan. ak-bankenrechner.at shows where the cheapest loan interest rates are available.
- Ask carefully about credit: When taking out a consumer loan, find out what the effective interest rate is. This is the interest rate in which all costs are included. A cost comparison is worthwhile because not only the interest rate, but also the one-off and ongoing additional costs, such as processing costs or required credit balance insurance, may differ.
- Be careful, plastic money is loose: Shopping with a plastic card is convenient. But while shopping you quickly lose control. Plastic money also encourages people to spend more. Determine in advance what your shopping budget is.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
