Want a new TV but don't have the money? Maybe you need a new washer/dryer or even a new bed? Why not buy now and pay later? It's what millions of Canadians do every year – but many of them are getting caught with unexpected interest payments when they miss their due date.

We've had many complaints from viewers who were not aware that if they missed paying in full the amount they borrowed on a deferred payment plan, they can be charged compound interest back to day one!

Martin Campbell told CTV News when he needed new hardwood flooring he went to Home Depot. He says he had the cash but accepted an offer to make no payments, interest free for a year.

Campbell told us "I bought $2,500 worth of flooring and they offered me an interest free credit card - so I said sure. It sounded like a good idea at the time."

Over the course of the year he moved and stopped receiving statements. When he went to pay his bill he was three months late and was hit with interest charges of 29 per cent - compounded from the day he bought the flooring.

"I was shocked when I realized there was $900 interest added to my account."

Credit counselors know all about people being hit with surprise interest charges. Laurie Campbell with Credit Canada says while some consumers do have the money but forget to pay on time -- most of her clients just can't afford to pay in full when the bill comes due.

"People who do the ‘don't pay a cent event' do it because they can't afford the furniture and they hope when the year rolls around they will be in better shape -- but often they aren't and when the bill is due they can't even begin to pay for it."

Home Depot says it makes its customers aware of its deferred payment plans with information in the store, in brochures and online. The company told us "The Home Depot, with our partner Citi Cards Canada, offers a number of special payment plans. Eighty per cent of our customers… pay off their account before any interest is charged."

Campbell admits he forgot to pay before the year was up. He says by keeping his money in the bank he made only $30 in interest but it cost him a $900 interest penalty. He says he won't take part in a deferred payment plan again.

Campbell said "I asked for a pair of scissors and cut up the card on the spot. I want to make sure I don't ever do that zero interest plan again."

Key points:

  • "Buy now pay later" programs are known in the credit and financing world as deferred payment programs or accounts.
  • The "interest-free" period generally ranges from six to 24 months, so it can be a good way to buy big-ticket items, as long as long as you pay it off in time.
  • If you don't pay off the balance by the due date, the annual rate of interest on a deferred payment scheme can range between 25-30 per cent and even higher
  • Sometimes there is also a deferral fee in addition to the cost. These fees can be a flat amount ranging anywhere from $25-75 or a percentage of the amount to be financed.
  • Pat suggests the bottom line is that if you can't afford it now, you may not be able to afford it later.
  • If you do decide to go with a no money down, no payments, no interest plan make sure you understand your obligation completely, write down the due date on a calendar and be sure to pay off the amount weeks ahead to allow for processing time.
  • Pay off as much as you can if you cannot pay off the full amount and keep in mind if you only pay the minimum monthly payment you could end up paying two to three times more than that couch or TV is worth.
  • The best advice? If you can't afford it now -- what makes you think you can afford it later? So save your money, buy used or do without if possible. Almost all of these plans have interest rates of 28 per cent or more.