[elijah'smom]

What are your thoughts on the retails stores offering 0% interest with no payments for 6 or 12 months? Knowing that you will pay it off before the 6 or 12 months is over, do you think its ok to take advantage of this offer, or would you rather save up and pay for the item outright?

Even though we've never had a problem paying the item off before the time was up, I still feel guilty or something or feel like it's wrong and that we should have saved up for it and paid cash. What do you all think of this? Do you use these offers when you need a new appliance or furniture or something?

 

[polyhymnia]

I would do it. Only if I had all of the money already saved up, though, in case anything went wrong in the interim and I wasn't able to save it before it came due. It's a handy way to earn some extra interest!

 

[annethcz]

I see what polyhymnia is saying but interest rates are so low now, you're not going to make much money by parking the money in the bank while making payments on a 0% loan.

Given the shaky economy right now, I'd save up the money rather than financing, even with a 0% offer. You never know when your income is going to drop, and I'd prefer to have fewer payments.

 

[polyhymnia]

Quote:

Originally Posted by annethcz I see what polyhymnia is saying but interest rates are so low now, you're not going to make much money by parking the money in the bank while making payments on a 0% loan. Given the shaky economy right now, I'd save up the money rather than financing, even with a 0% offer. You never know when your income is going to drop, and I'd prefer to have fewer payments.

I'm getting 6% on the first $500 in my savings account (.50% after that) - if it's a year of no payments, no interest on a $500 purchase that's still $30 that is essentially FREE to me. More, if it's over $500. I guess I just figure "why not".

 

[newbymom05]

I would totally do it, and have done it many times. Usually, I just go ahead and divide the payments by the loan period and make a payment every month. I've found that many retail stores will offer the no-interest plus a 10% discount for opening a line of credit w/ them, and I'll jump all over that! Of course they're hoping you won't make the payment and then they'll gouge you for the balance plus 28%, but if you have the money, why not take advantage?

We also paid for a necessary bathroom remodel (shower pan leak) using a Discover 0% card. We had the cash but didn't feel like parting w/ it all at once, plus it was earning interest in a savings account.

ETA cash is good too, though. I've never tried it w/ retail, but we've wrangled discounts by offering cash (new fence, house painting, etc).

 

[mightymoo]

I think you have to be honest with yourself. If you have the money now, and just want to take advantage of the interest you could earn, and will take that money and put it in a savings account, let it earn interest, and will make the payments on time to avoid any penalties (you need to be careful, because if you miss the payment or are late, you'll end up paying a lot of interest usually). If you have the discipline to do that, I see nothing wrong with it.

If you do not have the money in hand (not 'I can save that by then') or you are at all likely to spend that money before the 0% is over, then I don't think its worth it. Even for an item that is $3,000, if it was earning 3% interest in a bank account, that's only $45 or so over 6 months. I can easily see penalties and interest far outweighing that if you don't pay it off on time, etc. So, unless its a sure bet for you to do it right, don't take the chance, because you'll pay a lot more in the end than you would gain.

 

[JessicaTX]

Did you compare prices with places without that offer first? I've found that often the items on "sale" are marked up drastically.

 

[sanguine_speed]

I would definitely, as long as the money already existed. This is why I support financing large purchases such as vehicles, furniture or appliances at 0% interest as long as you have the liquid assets to cover those purchases, and would have made those purchases anyway.
If you buy appliances for $5000 and choose 'no payments, no interest for 18 months' and you have that $5000 sitting in an account earning 2.5% (money market or what have you), you're up almost $200 after 18 months...as long as you pay the bill before it incurs interest. Also beware of surcharges for using this...though even if you pay a $50 fee for choosing this option, you're still ahead of the game.

 

[Maluhia]

Dave Ramsey notes that 9/10 people who take these do not pay it off in time, and when you do interest is backdated and 24% or something like that. On the off chance something happened to me in the next six months, or that I forgot to send the check until 3 days late - I'd never risk that kind of debt.

It's an odds game and the odds are on the side of the store - that is why they do it.

 

[sanguine_speed]

Quote:

Originally Posted by KailuaMamatoMaya Dave Ramsey notes that 9/10 people who take these do not pay it off in time, and when you do interest is backdated and 24% or something like that. On the off chance something happened to me in the next six months, or that I forgot to send the check until 3 days late - I'd never risk that kind of debt. It's an odds game and the odds are on the side of the store - that is why they do it.

It's not an odds game. And you're overstating the average penalty...there are many plans that do not backdate, and many plans with lower interest rates...and while 9/10 people don't pay off in time, how many of these truly had the money already or honestly planned to pay it off? I'd bet many of those just wanted the thing and planned to deal with it later, without much plan at all...
Just because 9/10 people don't do it doesn't mean an individual's odds are 90% against his personal success (it's not roulette, is what I mean).

 

[bobandjess99]

We do. We frequently take advantage of "free money" offers to get things we want. But, we are exceptionally disciplined, and if we earmark money for something, that is where it will go.

 

[emaye_to_2]

If it is something you need and you feel confident you can pay it back within 6 months or 12 months I would totally take advantage and have a couple of times in the past.

 

[bright-midnight]

I learned that hard way that these types of deals are only good if you actually pay the item(s) off in the specified amount of time. I got hit with the back interest because I was unable to pay off the camera in time. I ended up paying over $1400 for a $600 camera. Lesson learned!

 

[lilyka]

as a general rule I would just save up. that said sometimes you just need stuff now and if you know you will pay it off this is better than high interest. but in my opinion it is always better to save up and pay cash. for the computer I am now writing on I saved up first, bought it with no interest/minimum payment for 18 months and paid the cash towards my credit card which had high interest. So even though I took on $700 in debt I also cleared out $700 in debt if that makes sense. but it made more sense to me to put it towards the 13% interest instead of the 0% interest.

on the other hand most of that stuff that offers those terms is stuff you can live without. Ans just because you can afford it today doesn't mean you will be able to make the payments 6-12 months from now. I could totally afford the payments on my furniture when I bought it but since then things I needed more cropped up. I would plan on making payments twice what you need to to have it paid off. just in case.

 

[Astrogirl]

I may do it, it really depends on the situation at the time.

That said, I don't respect these offers because I think that the stores are targeting people who can't otherwise afford the items and it feeds off their vulnerability. In other words, the odds are on the side of the store, and its somewhat entrapping to those people. If you have the money in the bank, great. But those people with money in the bank would buy the item they needed regardless. These offers are made specifically so they can reach another target audience - those that do NOT have the money in the bank and these are the ones who are at risk for accumulating debt just by having these so called "win win" offers dangled in front of them.

Like someone else said, the odds are on the store. Otherwise, they wouldn't offer it. It's not like they really care about the consumer and giving you something for "free".

 

[lilyka]

actua;lly I used to own a business that did this. we did not care about the interest but people would come buy the large ticket item, get approved for twice what they needed and then spend on average 30% more. if they buy the computer they will buy the accessories since it is all financed. if the buy the couch they might as well get the chair and coffee table too. it is a simple tool to increase suggestive sales.

if you do decide to do this know what you can afford and know what your budget and what you want and then buy nothing else.

 

[velochic]

If you have the cash already, try negotiating a lower price for paying in cash rather than financing.

We have taken advantage of these deals in the past, but have always had the money on hand. Sometimes we've negotiated a lower price and sometimes not by paying in cash.

 

[laohaire]

I would not. It will work fine if everything goes perfectly, but the potential loss is larger than the potential gain.

DH and I financed a dishwasher on 0% for 12 months. We could easily afford the payments, so we weren't worried. Actually, I don't have a bad ending here; we paid it off a few months early and walked away with no consequences.

BUT - we paid it off early because we started to realize that we were not in total control. All it would take would be a check lost in the mail or some stupid thing. Also I think some lines of credit they keep open after you pay then charge you an annual fee or something dumb like that - so you have to be sure to close it on time. Anyway, I realize that we planned to pay it out of our salary (though honestly we could have paid out of EF if we HAD to - but that's not what the EF is really for) and that's different, but we still saw that we weren't in control, and the $30 or whatever we earned in interest just wasn't worth the risk.

But that's just our experience. No more financing, even at 0%, for us.

ETA: Forgot to mention - it's not a big deal but we didn't care for all the junk mail we received due to financing either.

 

[cappuccinosmom]

I wouldn't do it.

We are far too disorganized and the economy far to shaky for us to play games with interest rates and such. For me, I like the safe way. And that is cash up front.

 

[mnnice]

I have in the past, but it seemed like an uneccessary stress to make sure you had it paid off in full and not get hit with very high retroactive interest.

We also purchased a vehicle with a 0% loan that we could have paid cash for. I wouldn't do that again either. DH would have never wanted any truck more than he would have loathed to give a car dealership 360 $100 bills.

I think spending your money at small business and telling them you have cash will net you a better deal than the crummy interest you'll earn in the 6 or 12 months in most cases.