Christmas presents: warning against expensive installment payments

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In the middle of the Christmas shopping season, the Chamber of Labor warns against buying gifts from mail-order companies in installments.

Under certain conditions or as part of promotions, there is the possibility of zero-percent financing, but apart from that, installment payments can be expensive. The effective interest rates can be more than 20 percent, writes the Chamber on Tuesday.

Effective interest rates for mail-order companies can be more than 20 percent
According to the AK, the effective interest rate at Universal Versand, Otto Versand, or Neckermann.at is 21.70 percent. If the interest rates are lower or even zero, there are often special offers with certain conditions behind them: At Amazon, the zero percent interest rate would only apply to selected products, otherwise the interest rate is 12.05 percent, according to AK. Klarna Bank also offers zero percent interest, but only if three installments are paid within 60 days. Zero percent financing is also possible at Hornbach, with terms of 12, 18, or 24 months. For alternative terms of between 12 and 60 months, however, an interest rate of 6.9 percent applies.

Consumers should pay attention to the “small print”
“Instalment loans are among the most expensive forms of credit,” says AK consumer advocate Christian Prantner. It is important to always pay attention to the “small print”, as cheap financing without interest is usually linked to special conditions. “It also sounds tempting when mail order companies advertise 1.65 percent per month, for example. That doesn’t look like much, but when calculated over the year, it’s very expensive.”

The AK therefore advises customers to look closely at the effective interest rate and the total of all installment payments and to watch out for expensive insurance packages. “The effective interest rate shows the actual cost burden,” says Prantner.