Comments on: The Danger of No-Interest, Same-as-Cash Purchases

By: Cris

Cris — Thu, 27 Aug 2009 19:22:06 +0000

I had a quick question, I need to get a laptop for school and I was looking for a mac book pro and there was an offer for a 12 month same as cash deal for it, all you had to do is sign up with the credit card and pay as low as $28.00 a month. Is this a good deal or not? Should I pay $28.00 a month or $100.00?

By: MM

MM — Mon, 18 May 2009 13:21:52 +0000

I bought an engagement ring with same as cash 12 months. I paid a lump sum of 4k two months before the final payment was due and I thought I was in the clear. I made a mistake, I owed 50 dollars still and when the 12 months came up they tacked on a 1k interest payment. Does anyone know how to get around this, I thought I was done and this just seems excessive?

By: Purple_Kangaroo

Purple_Kangaroo — Wed, 16 Aug 2006 17:29:48 +0000

Wow, thanks for the warning. I’d never heard that before.

By: Jerry Kindall

Jerry Kindall — Tue, 08 Aug 2006 07:01:24 +0000

However, I do know that for most of these stores, a customer paying cash is better than one financing.

Sometimes. On the other hand, customers with credit tend to buy more. A store that finances through a bank gets their money right away too, more or less, and the bank probably gives them a commission. (My sofa I bought from La-Z-Boy was financed through Wells Fargo.)

By: Anonymous

Anonymous — Sun, 06 Aug 2006 20:25:04 +0000

Yes, the interest is deferred, but it is accruing during the free period. And the interest rates on these deals are typically around 24% from what I’ve seen. We did take one of these deals for reasons similar to yours. We had the money, but not all in the right place. We played the game though. We moved the money for the payment into a money market account and let it earn interest for 5 months. The payment is going out next week.

The risk in all this is that you will spend that money on something else before that first payment is due. Even if you are only a little short, if you don’t pay off the loan in full before the end of the deferral period, you owe all of the accrued interest. I view this kind of deal the same way I view credit cards with a grace period on the interest. They provide me with the convenience of not having to have lots of cash or a high balance in my checking account before I go out to make a purchase. I still have to have the money to pay for it, or it will cost me much more.

By: Medicated Money

Medicated Money — Thu, 03 Aug 2006 23:56:12 +0000

I do not know how much of hit it would do to your credit score a few months after the purchase. However, I do know that for most of these stores, a customer paying cash is better than one financing. Due to this, we have had great success in negotiating a better deal on the furniture we have bought by offering to pay cash. Both times we have down this, we needed to speak to the floor manager to make the deal.

We recently purchased a nice over-sized couch for our small ‘media’ room, and were able to purchase the couch for 15% lower then the sale price due to offering to pay cash.

By: Andrew

Andrew — Thu, 03 Aug 2006 21:49:41 +0000

A very dangerous yet tempting deal for many people. The store is not in business to lose money. Besides if so many people were not paying everything with credit cards and not having cash to pay for things then these types of deals would not exist.

By: Hal

Hal — Thu, 03 Aug 2006 19:15:15 +0000

I completely agree that these arrangements are very dangerous for those who aren’t careful, which unfortunately is a good majority of the population in my view. We purchased about $3500 in furniture last summer from a large furniture store in Houston and did the 15 months no interest deal. Of course if we don’t pay it off by the end of the 15 months we get socked with that huge charge for the accrued interest, which the last I looked was at about 25.9% and up to $1100.

On the other hand, it has worked out well just letting that cash sit in a high yield savings for the last year. I figure by the time we pay it off we will have made about $150 in interest.

By: mapgirl

mapgirl — Thu, 03 Aug 2006 16:59:16 +0000

I suppose it’s the mix of credit rating stuff that makes the score go up or down. But I wonder if Kim checked her credit score right away, or she’s just reporting what it currently is 4 yrs later. I would think it would show up in 6 months, but it wouldn’t be a negative unless she didn’t pay it off under terms.

But I’m just conjecturing. I try not to buy anything with delayed payments, etc. Luckily, I haven’t had to purchase anything large (over $1000) after I moved into my condo. (I did buy a nice couch, but I paid for it with cash that I had reserved from settlement, so it doesn’t really count.)

By: Kim

Kim — Thu, 03 Aug 2006 15:54:32 +0000

I’m responding to Herb’s comment. I bought my bedroom set four years ago and today I have an excellent credit rating. Taking out that furniture store loan didn’t seem to affect my rating in the slightest.

By: Herb

Herb — Thu, 03 Aug 2006 15:10:59 +0000

Why pay it off right away? You’ve already taken the credit hit, so you might as well get something in return by stashing that money in a savings acct and then paying it off a month early. I’d call this the high-risk version of 0% BT’s.

Money Magazine also did a short story on these. They claim that opening these, especially at places like furniture stores is especially harmful to your credit because most are backed by “lender of last resort” types instead of well-known banks and FICO takes that to mean you are a higher credit risk because you had to go through them instead of going through a more reputable bank. No idea if that’s true though…

By: Kim

Kim — Thu, 03 Aug 2006 14:03:37 +0000

After my divorce I wanted a new bedroom set – I bought one I absolutely loved at a furniture store in town – I didn’t pay one single penny on it till it was almost a year old. I signed up for the no payment deal for a year and saw the interest accruing each month on the bill but I saved for the furniture all year, getting ING interest, and then I paid it off in full one month before the year was up. I think it’s a great deal. Of course, they are hoping you mess up and have to pay them hundreds of dollars interest. But not me!! ha!

By: Blaine Moore

Blaine Moore — Thu, 03 Aug 2006 12:54:17 +0000

Yeah, almost every program works that way when you finance through a store.

I spent about a half of an hour when I bought my television a few years ago confirming that they in fact did not start accrueing any interest until after the 12 months. I must have asked the same question in at least a dozen different ways. But, nothing I was signing said anything about deferred interest and the guy selling me the television said it seemed strange but it was actually a good deal.

I still paid it off early.

By: mark ingle

mark ingle — Thu, 03 Aug 2006 12:44:54 +0000

Yes it’s a buyer beware program. I use these all the time but you have to pay it off one month before the term is do just in case they say that they didn’t get your check. I have heard horror stories were the company said that they didn’t receive the payment and you get clobbered with all that deferred interest. I also take the point that I can make more interest on my money buy using this system so I do. I feel it’s like somebody is paying me to use their money. Of course that depends on if I can get a discount on cash or not.