With Christmas on the horizon, many of us are doing our best to keep on top of our finances.
Golden Christmas with marigolds
But did you realise you might be borrowing money without even realising it?
Lenders and retailers have become crafty when it comes to offering us credit. They know we’re sceptical of high-interest rates and rip-off deals so they have found ways to lure is in to deals that could trap us in to expensive interest regardless.
Here’s what to watch out for over the season of goodwill.
These cards have been rebranded as ‘discount cards’ by many retailers. If you get to the till and are asked if you want to take advantage of a 10 percent discount offer by signing up for a card, it’s probably a high-interest storecard they’re flogging in disguise.
If you want to take the discount, pay the full balance off the card asap. Interest can reach up to 40 percent if you don’t.
If you think catalogues vanished with Littlewoods, think again! Most major online retailers offer deals that work in the same way.
Interest-free periods and options to pay in varying instalments are all designed to lull you in to a false sense of security. The retailer is gambling that you won’t pay off the balance before the interest kicks in – and they’re usually right.
They also take ‘minimum’ payments that don’t clear the balance in time to avoid interest too. Finally, payment dates often work on a 28-day cycle rather than on a set date each month, which means your bill becomes due slightly earlier every time.
Your flexible friends can be really useful to tide you over in an emergency, like getting stranded abroad.
They can also give you a number of consumer rights if you’re spending over Sh10000 and there’s a dispute with the supplier.
But, credit cards require discipline – and many of us just don’t have it, despite our best intentions.
Be very careful about leaving your credit card on ‘virtual wallets’ like Apple Pay or PayPal. With a few clicks you can spend a fortune without realising how much debt you’re running up. And interest rates are creeping ever higher too.
State taken to task on public debt
A massive 85 percent of car finance deals are hire purchase, which has had a makeover and morphed in to ‘PCP lending’.
These deals are hugely complex so if you’re treating yourself to a vehicle upgrade over Christmas, set a budget before you buy and don’t get talked in to overspending by the salespeople.
Watch out for the terms and conditions too – you can be charged for everything from minor damage to going over mileage limits.
The golden rule is be sceptical if you don’t have to pay straight away – as chances are there’s some hefty interest waiting in the wings.
But, if you do get ripped off by a retailer, make a complaint – it’s free and credit complains can be looked at the financial ombudsman too.
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