How to make sure you're not caught by interest-free deals as Christmas approaches

The season for spending is rapidly approaching, with Christmas just over a month away. But as stores lure you in with interest-free deals, how good of a bargain are you really getting?

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Those great deals that lure you in could spit you out with large amounts of debt. Source: Seven Sharp

Consumer NZ is warning Kiwis to read the fine print before jumping into a deal that may be too good to be true.

Head of research Jessica Wilson told TVNZ1's Seven Sharp that, while a deal may be interest-free, it's seldom fees-free.

"You usually have to pay a fee to set up the deal and there's an annual account fee on top," she says.

"So the longer you take to pay it off, the more you'll pay overall. And we're talking about sums of up to $300 if you're paying off something on a 60-month interest-free term."

And if you don't manage to pay off your item within that interest-free period, it could turn into an expensive lesson.

"You not only face late payment fees but if you don't pay it off within that interest-free time, the interest rate that can apply at the end of the interest-free period can be something as high as 23 per cent," Wilson says.

Before jumping into an interest-free contract, Wilson recommends doing your research, including comparing the price at other stores and taking into account extra fees you'll pay over time.

And it's worth considering avoiding it entirely. 

Wilson suggests saving up for your purchase if you can, rather than getting it on a contract, or looking at buying second-hand.