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Interest free offers - false advertising?

Discussion in 'General Chat' started by sydboy007, Jun 9, 2014.

  1. sydboy007

    sydboy007

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    I have an issue with the current no deposit interest free offers currently being pushed onto the market.

    The below offer from DSE is symptomatic of the kind of deceptive offers out there.

    The company is advertising 24 months interest free with no deposit on purchases over $600. I believe this is being deceptive as:

    * There is a $60 fee to establish the interest free account
    * There is a monthly fee of $2.90 on the account
    * There is a $60 annual fee 12 months after the account is created.

    I would argue the $60 account establishment fee is no different to a deposit (yet increases the cost of the purchase), the $2.90 account fee is similar to interest.

    All up a customer keeping the account for 23 months faces a total cost of $60 establishment fee, $60 annual fee, $66.60 in monthly account fees which totals to $186.70. For a $1,000 purchase this would equate to a cost of 9.7% annually.

    I know one should never sign on the dotted line without understanding the full implications, and generally should avoid debt that is not self liquidating, but sometimes we do need to be protected from ourselves and I think these kinds of offers should be banned, or at least the actual costs better explained.
     

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  2. Panaman

    Panaman

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    I have seen a quite a few similar offers from the large retailers, DSE being just one, seems to be there latest advertising lure, many have the condition of getting there branded Visa/MasterCard in order to get your interest free offer, but then there is the establishment fee and annual fee for the card which is hidden away in the small print.

    Didn’t they just stop the petrol stations with agreements with the big supermarkets from doing something similar with petrol prices? That is only showing the discount price that you got if you had the required docket from Coles or Woolies.

    Let’s hope they take action on this as well.
     
  3. McLovin

    McLovin

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    Geez, Syd, you know it's a wet long weekend when...:D

    But seriously, I agree with you. Guys like Thinksmart pretty much make their money through these no interest loans. It is deceptive IMO. And while yes, you should read the fine print, let's face it if you are getting a loan for a $500 TV you're probably not the savviest person out there.
     
  4. bellenuit

    bellenuit

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    That certainly seems deceptive.

    I usually find that companies who offer interest free purchases (those that are above board and genuinely interest free) will usually be receptive to discounting for cash payment. If you have access to cheap finance of your own, say a mortgage offset account that allows redraw, you may find that it will be cheaper to borrow from that account and pay in cash getting the discount. A quick rule of thumb would be if the % discount you can get is greater than the interest rate to borrow from your own sources, then borrow from your own sources.

    If you find they are not willing to discount for cash and their interest free offer has no hidden fees, then if you do have ready cash (not borrowed) I would take their interest free offer and park my cash in a high interest online account or term deposit for the duration of the interest free period.
     
  5. basilio

    basilio

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    Interesting discovery Syd Boy.
    My concern about the no interest deals has been the discovery/realisation that if you don't pay the whole amount at the end you are charged interest from start of the loan. At least that was the case with afew loans I saw.

    It seems that this was a clever way to rope in the feckless with an easy loan that almost inevitably turned into a very expensive (30% plus) deal.

    https://www.moneysmart.gov.au/borrowing-and-credit/other-types-of-credit/interest-free-deals
     
  6. Julia

    Julia In Memoriam

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    All just reinforces the reality that the people who are not savvy in the first place, will not know what they don't know (with apologies to Donald Rumsfeld), will not suddenly decide to read the fine print because they've never done it and somehow manage to deny it exists, and as a result we have the continuation of suckers ripe for the picking.
     
  7. sptrawler

    sptrawler

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    I remember years ago, a person I know bought a car at the same time he bought loss of income insurance, to cover the loan.
    When I read it, I pointed out that the insurance priemium, was twice as much as the coverage provided.
    The small print said, it would cover $5,000 or three monthly car payments, which ever was the lesser.
    He felt a bit sick after reading that, lucky for cooling off periods.
     
  8. DocK

    DocK

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    Slightly off topic, but I had to have a chuckle last week when we received a paper brochure and an email linking to a website with online sales from the same company last week. Their brochure prices, for pickup from a retail outlet, just happened to be on average $6 less than the online price for the same goods - yet the website trumpeted "free postage". They may not have charged for "postage" as such, but surely inflating the price for the same item online vs in store is doing just that.
     
  9. DJG

    DJG

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    They may also trying to get you in store 'to pick up' when perhaps they're hoping you will impulse purchase something else. Smart idea.
     
  10. sydboy007

    sydboy007

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    I remember seeing this a long time ago with Harvey Norman when I was looking to buy a new sound system. Went in one week pricing things then about 2 weeks later they had 2 years interest free so though why not as interest rates back then were much higher. Well the prices had gone up around 10%, so I could see where the interest had been deposited, and it wasn't going to be in my bank account.

    At least back then there was no deposit and no monthly fees with the offer, though they'd get you if you hadn't paid it off fully within 2 years by back dating the interest.

    I just think these kind of predatory actions should be banned. The idea that it's all there in the 10 pages of fine print doesn't really cut it with me.
     
  11. Macquack

    Macquack

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    These big banks and finance companies are "faceless" entities that get away with blue murder.

    If a sole trader dealing directly with a customer tried to pull a stunt like this they run the risk of having the life beaten out of them.

    So I say lets string these parasites up to the nearest light pole.
     
  12. sydboy007

    sydboy007

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    Just have to see what CBA was getting away with during the GFC. Am surprised the senate committee is still going after the banks, but that might change next month once the O4B Government takes control of the senate.
     
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