Trouble in store over offers of 'free' interest

Financial writers should know better when it comes to what lurks in the small print of loans. But, like doctors who smoke, driving instructors who break the speed limit and vets who end up get bitten by angry cats and dogs, not all so-called professionals take their own advice.

As a full-time freelance journalist I'm used to writing for cash-strapped and spent-out twenty and thirty something women, so I should really have read the small print when I had to replace a laptop in February this year.

Smarting from a recent large tax bill my only choice was to take up PC World's offer of store credit. I ended up buying a £1,299 laptop plus a £200 iPod plus a £499 insurance package, a total of £2,052.99. I agreed to repay this back at £70 back each month over a period of three years.

The store assistant told me that I would not have to pay any interest if I paid the total back within a year. I cringe when I think of it now, but I did not even check the interest rate, or what the small print said about this 'interest-free' offer. I was determined to pay back the full amount within the year, so it didn't really matter what the rate was.

Seven months later, with a new job and some spare cash in hand I made the sensible decision to clear my laptop debt, which I had reckoned at that stage to be just over £1,500.

It wasn't. HFC Bank, which operates PC World's store credit, informed me I still owed £2,000. I asked what had happened to the interest free deal but HFC Bank told me there had been no such option and that in seven months I had already racked up nearly £500 interest.

So, I called the store, only to be told to go away and read the small print. It was my word against the sales assistant's. There was nothing I could do except pay up. I decided to pay what I felt I owed, £1,500, and argue about the interest with PC World later.

But when I called HFC Bank back to make the payment I was informed I would have to pay another £800 interest. Even more shocking, and only after I insisted on the information, I was told that if I kept the loan running for the full three years I would have to pay an extra £1,319.01 in interest alone. This brought the cost of my laptop - now worth a sickening £700 on the Apple Store website - to over £3,000.

According to PC World it was my fault for not reading the small print. PC World maintains that it was I who made the mistake.

But after a lot of discussion, it has now agreed to refund my interest as a gesture of goodwill. Gina Jones at PC World said: "All our sales assistants are fully trained and informed about credit, we have been selling goods with very few complaints for years."

So how can you avoid making the mistakes I did? Well it's probably best to avoid store credit altogether.

If you are going to borrow a sum of more than £1,000 look around for a loan or a zero per cent credit card as their interest rates are on average nine times cheaper according to the Consumer's Association.

Last year a CA report found that someone borrowing £5,000 over three years using an in-store credit deal at 30% would pay just over £2,000 in interest compared to £540 for a similar loan of 7%.

In-store credit deals and store cards are the most expensive ways to borrow. Beware of anything offering a zero per cent period at the start of the loan because if you do not pay the loan back within the interest-free period, normally around 12 months, you end up paying interest back to the day the loan started.

Always check the rate you see advertised is the rate you get - sometimes it is the lowest rate that is advertised in the store. Make sure you know how the interest is being calculated, mine was calculated monthly, so in effect I ended up paying 19% of the total loan each year.

The Office of Fair Trading admitted that when it comes to any type of credit there is no substitute for reading the small print.

"If someone mentions an interest free credit deal get it down in writing," said Roger Hislop of the OFT. Shoppers should not take anything for granted. "If something is said verbally it could be part of the legally binding arrangement but proving it could be a problem and deals do change."

The OFT also recommends that you get any promises in writing, and above all get the store to explain how the interest works.