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Interest-Free Not So Free

Buy a $2,000 TV on credit and don’t pay interest for a year! Purchase a refrigerator, interest-free for three years! Such offers may sound tempting but if you’re not careful, you could lose a lot of money.

If you miss a monthly payment (often 1 percent of the balance), pay it late—by even a few hours—or fail to pay the balance by the deadline, you could be charged the entire interest retroactively from the date of purchase. And interest rates on these deals are high—“19.8 percent, sometimes higher,” says Gerri Detweiler, credit adviser at

An interest-free deal is good “for someone who is disciplined and has good credit. It can allow you to keep your own money in the bank and benefit from the float. But the traps are numerous,” she says, which means your $2,000 TV that came with a year of interest-free credit could end up costing $2,400 or more.

Caroline E. Mayer is a consumer reporter and lives in Arlington, Va.