Buying items on credit allows you to purchase an item now and pay for it in the future.  Remember though that, you are paying for the privilege of borrowing somebody else's money. The result can be that items purchased on credit can end up costing us a lot more than if you paid cash.

One of the ways which a lender recovers the cost of lending you money is by charging interest on the amount you borrow. In order to entice consumers, a lender will often offer promotions for a low interest rate or even no interest for a specific period of time. We often see this in furniture and appliance sales, or even from our credit card company to give us a break after Christmas. What the borrower needs to be aware of is that there is a difference between interest free period and a grace period. When the lender offers an interest free period, interest does not accrue on the amount borrowed during a specific time. During a grace period however, interest does accrue but does not have to be paid if the borrower meets certain conditions, such as no late payments. For example, if you purchase a fridge and have a one year interest free period, you do not have to pay interest during that year and interest will not accrue. If you purchase a fridge and have a one year grace period, you may have to meet the condition of making all my payments on time or I will be charged all the interest that accrued during that year. This could end up costing a lot of money if you are not aware of this before you make the purchase.

Next time you see an ad that offers no interest payments for a period of time, read to see if it’s an interest free period or a grace period. Under part 5 of the BPCP Act, any advertisement that says, or implies that there is no interest for a certain period of time it must also say if its a interest free period of a grace period. If it is only a grace period, it must also say what conditions the borrower must meet in order to not pay the interest. If the ad says or implies that no interest is payable does not state these conditions, the ad is deemed to be for an interest free period.

Buying items on credit allows you to obtain something that you cannot wait for like replacing a broken stove or fixing the roof. Just make sure you are aware of what your obligations as a borrower are before you enter into the agreement. If you have questions about your rights and responsibilities, call our inquiry officers toll free at 1-888-564-9963, email us at This e-mail address is being protected from spambots. You need JavaScript enabled to view it or send us a question on our Facebook page.