MONEY TALK: But what does 'interest-free' cost?

I WATCHED with interest the programme Fair Go recently where it talked about interest-free deals so I thought it could be time to revisit an article I wrote on the same subject just after Christmas last year.
It seems to me that there have been many sales advertised giving the impression that this is a one-off event - you must do it now to save a huge amount of money.
It also seems to me that just a few weeks later the same people are saying the same thing in a slightly different way.
An example of this, is a pre-Christmas sale, then an after-Christmas sale, then a New Year Sale and then a Back to School Sale. Now it seems there are midyear or midwinter sales to entice people to take on "buy-now pay-later deals".
There will always be sales so it is a good idea to let your emotions decide before spending your money.
My curiosity was raised enough by the advertising after Christmas to go and check out "interest-free" deals being offered, especially the ones being offered for a long period of time. So I got a brochure on the company offering the finance at no interest. I am one who loves to read the fine print and work out different scenarios of the real cost of things. This is what I found.
This particular card I looked at required a minimum purchase of $100 before you could have one to put your interest-free deal on. The set-up fee for this account was $35 which I was told could be added to the first purchase. The cost of the card was $25 per annum, only payable if the account was open for more than a year.
So, if you bought something electrical or a piece of clothing for $100 and put it on this particular type of card the item would cost you $135 if you paid the item off in a year. What percentage is $35 of $100? - it is 35 per cent. Yes, it is interest-free but doing this type of transaction would cost you another 35 per cent more than paying cash. Interest free - yes - but cost free - NO!
Another interest-free deal I looked at had a minimum purchase of $1000 which could be taken over four years. It was interest-free.
However, look at the costs to have this interest-free deal of $1000 over four years:
* Set-up cost of account $35.
* Cost of card $100 ($25 per year for four years).
So the cost of this interest-free deal is $135.00. This $1000 item would cost you $1135, not $1000, and you would be committed to payments for four years.
This equates to 11.35 per cent extra than the original price of the goods. Before you rush out and get that amazing interest-free deal on no deposit and four years to pay, stop and think "what is it really costing me?"
Interest free yes - cost free no.
Sylvia's book, Parents: How to Stop Your Kids from Going Broke is available from www.silbo.co.nz, Paper Plus Stores, and Christian Bookshops.
She is also available to speak with business and community groups and give tips on how to raise financially savvy kids.