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What We Should Know About the "Pay Later" Promotions

Consumers are often exposed to promotions when purchasing products where they can take their purchase home right away, and pay for it at a later date. This kind of promotion is commonly seen in the sale of domestic products such as appliances, bedding and furniture. We also find this type of promotion in vehicle leasing or financing; where no payments and no interests are required to be disbursed in the first few months after the purchase of the vehicle.

This type of promotion can ease the transaction and make it easier for the client to take a decision at the moment of purchase, but is it actually an advantage for the client to pay at a later date?

The "no payments for 12 months" promotion applicable to the purchase of furniture and appliances generally does not mention anything about applicable interest fees. Yet, credit in the business world is never free. Credit fees are often passed on to clients, and the interests are hidden in the price of the product. If a client decides to buy the product in cash, and does not take advantage of the promotion, he will still pay for the credit interest which he actually didn't use!

What we should know about the "pay later" promotions For companies in the furniture and bedding industry, the profit margins may be higher, but their line of conduct is the same, and the company might still be hiding interest fees in the product's selling price. Is that unfair for those buying cash? Yes, and consumers have to be vigilant, as it is their right not to pay for the credit they are not using. If you want to use the credit behind this kind of promotion, try to find out what is the applicable interest rate included in the price, and see if it is worth it. For example, a rate of 5% interest annually, included in the price, could be a fair rate.

Some types of promotions are also offered when leasing or financing vehicles such as cars, boats, motorbikes, ATV, snowmobiles, etc. A promotion that is frequently seen is one that offers consumers the chance to complete the purchase with cero payments and no applicable interests for the first few months after the purchase. This means that you can enjoy the possession of the vehicle without having to pay anything in the first months. But remember, nothing is free, and the interest fees are most probably included in the total purchase price. Yes, you won't pay anything during the promotional months, but the interest fees of the delayed payments will be included in the monthly payments later on.

These are a few examples where consumers think they will not pay any interests on delayed payments, due to a promotion. It is important to understand that nothing is free in the world of credit and that companies offering free credit wouldn't stay in business if that was the case. There is always someone paying the bill, and he will try to pass it on to someone else, usually the consumer.

Try our calculator Paying Less With Credit Promotions >

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