KEY POINTS:
Shoppers are being warned to take care when buying goods on no-deposit, interest-free deals this holiday season.
Many chain stores - especially those selling "big ticket" electronics and appliances such as Harvey Norman and Noel Leeming - are again offering long-term credit deals.
However, David Russell, chief executive
of the Consumers Institute, says that, though long-term interest free deals on things such as big-screen televisions may seem like a good bargain, buyers need to be aware of additional, associated costs.
He said buyers needed to understand right from the start that interest rates were not the only thing to be concerned about.
"The interest is only one component of the cost. You will be paying full retail price and there will be other costs associated with the deal," Mr Russell said.
Many stores offer long-term, interest-free sales over the holiday period in an effort to clear extra stock taken on for Christmas.
Electronic appliance giant Noel Leeming, for instance, is offering three-year, interest-free deals on products priced at $1500 and more.
Competing national chain Harvey Norman has a deal that requires no initial deposit and no interest payments until 2010 on products costing more than $1000.
The deal includes a $35 establishment fee and an annual fee of $25.
While buyers may not have to pay a monthly rate or any interest for years, the interest they are eventually charged will often exceed 20 per cent - more than that charged on most credit card debts.
The Credit Contract and Consumer Finance Act states anyone signing a long-term, interest-free deal must be provided with all the information and costs associated with such a transaction.
Mr Russell said despite this, there was nothing to stop a seller providing the information after a consumer has already signed a deal.
"Make sure you know everything before you put your signature on the bottom line."
The best way for buyers to protect themselves was to ask the seller questions, he said.
"The simple question is: I want to know every cost above the retail price."
Ann Smith, president of Budget Advice Service, said the agency tried to help people who found themselves in trouble with long-term credit deals. "People get into these deals and then they find out they can't afford it."
What to expect
Accurate: Information provided by a seller should allow clear conclusions about the cost of credit.
Comparable: Information provided should be easily comparable allowing meaningful choices between competing offers.
Clear: As far as possible, information presented to you should be presented clearly.
Timely: You should receive all essential information before committing to a credit deal.
Source: consumeraffairs.govt.nz