Free and Low Cost PC Offers

An FTC Consumer Alert about low- and no-cost computers

You've probably seen the ads for "PC's for $199" or even "Free PC's." If you're in the market for a personal computer, the Federal Trade Commission has important information for you: "Free" doesn't always mean free. Very often, the conditions described in current offers can turn so-called "free" or low-cost PC's into bigger-ticket items than you think.

Getting Started

To get a "free" or low-cost PC, you may have to pay the full price of the PC or the computer system - which may include the monitor, printer, CD-ROM - up front. You also may have to sign up for - and pay in advance for - up to three years' worth of Internet service. Some sellers may provide instant cash rebates. But more often than not, you may have to send documentation to the manufacturer or retailer within 30 days of your purchase (usually the original sales receipt, UPC code, rebate slip, your name, address and phone number) to get your cash rebate. It can arrive up to 12 weeks later.

The Internet service you've locked in may cost $20 to $30 a month - a total additional cost of over $1,000 for three years of service. You may be required to pay that amount up front, or monthly payments may be charged to your credit card. Some sellers charge additional fees if you pay that three-year contract fee on a monthly basis. The result? You pay interest charges not only to the seller, but also to your credit card company if you charged the service and didn't pay the entire amount in the first month.

If you decide to cancel the Internet service before your three year commitment is up, chances are you will have to pay a penalty. Cancellation penalties may range from a $50 to $100 fee to paying back some or all the rebate you received to returning the computer.

Other items to consider:

• The "free" or low-cost PC may not have the components you want, and those it does have may not meet your needs. You may have to pay extra for a monitor, a printer or a CD-ROM - costs that could add as much as $500 to your bill.

• You may not get a computer with enough capacity to store your information, run your software or surf the Web with the speed and convenience you want.

• If you're required to sign-up for Internet service, ask the seller and the Internet service provider if there is a local Internet access phone number. Paying long distance phone charges for Internet access could end up costing a fortune. If a toll-free number is offered, you still may have to pay surcharges of up to $6 an hour for access.

• Some "free" PC deals may require that you buy a certain amount of merchandise from the seller's "shopping mall," while others may require you to accept a steady stream of advertising on your screen.

Payment Options

Consider all the payment options and related fees before purchasing your computer. That means do the math. Consider these different scenarios:

• If you use your credit card to purchase a PC system that costs $1,000 before $800 in mail-in rebates, be aware that if you don't pay off the entire $1,000 balance on your credit card in the first month, you will likely pay substantial interest rates on the unpaid balance until you pay it off. If you buy with a credit card and get an instant $800 rebate on the $1,000 purchase, you will pay interest charges on the $200 balance until you pay that off.

• If you're buying a PC through a rebate promotion that offers zero percent financing, the amount financed may be the total cost of the system before the rebates, not the "after-rebate" cost. That is, if you purchase a PC system that costs $1,000 before $800 in rebates, you could make payments on the full purchase price, not the "after rebate" $200.

• Some sellers offering "free" PCs in exchange for long-term Internet service commitments may require that you finance the cost of the Internet service through their organizations.

Reading the Fine Print

It's important to read the "fine" print of any contract or purchase agreement before you buy a product or service. If you don't understand it, think twice about making the purchase.

• Ask about other deals. The Internet service provider may offer less expensive monthly services or a lower price for a long-term commitment than they've bundled into the "free" or low-cost PC offer. Many ISPs also offer discounted monthly service plans for five to 10 hours of Internet use a month.

• Make sure that the speed of the modem (56K, for example) in the computer you buy matches the speed of the local phone lines the ISP is offering. Check for any access or connection problems to the Internet service provider before you enter into a long-term agreement.

• When you file for your rebate, make a copy of every item you send to the company. If you don't receive the rebate in the time promised, contact the company to find out why. You may have to resubmit copies of the materials you sent originally. If you still don't receive the rebate, file a complaint with your state Attorney General, local Better Business Bureau or the FTC.

• Check the warranty and technical support policies in any "free" or low-cost PC rebate offer. Some may include toll-free support for a limited time, say 15 days, while others may not include it at all. Longer-term support services may cost extra, or may be charged on a per-incident basis. They also may be subject to long-distance phone charges.

Technology is changing at a dizzying pace. It's possible that the three-year Internet service you lock in today could be out-of-date in six months or a year.

If you think you've been misled about a "free" or low-cost PC offer, contact your state Attorney General, local consumer protection agency or Better Business Bureau.

You can file a complaint with the FTC by contacting the Consumer Response Center by phone: toll-free 877-FTC-HELP (382-4357); TDD: 202-326-2502; by mail: Consumer Response Center, Federal Trade Commission, 600 Pennsylvania Ave, NW, Washington, DC 20580; or through the Internet, using the online complaint form. Although the Commission cannot resolve individual problems for consumers, it can act against a company if it sees a pattern of possible law violations.

The FTC publishes free brochures on many consumer issues. For a complete list of publications, write for Best Sellers, Consumer Response Center, Federal Trade Commission, 600 Pennsylvania Ave, NW, Washington, DC 20580; or call toll-free 877-FTC-HELP (382-4357), TDD 202-326-2502.