A few weeks back we purchased some furniture in a 12 months, no-interest, same-as-cash credit transaction. In short, this was a move made in the interest of convenience. We had just paid the movers with our credit card (to the tune of $7k) and were waiting on reimbursement from my new employer, and we were in the midst of shuffling funds from one bank account to another. Thus, when we were out and about and found the sectional that we wanted, we decided to just open a store credit account to save us another trip. I know, I know, opening unnecessary credit accounts isn’t good for your credit score. But that’s not the point of this story…
The point here is that these are really dangerous transactions if you don’t know what you’re doing. In our case, it didn’t really matter. We had the money, just not in the right place, and we were planning on paying it off immediately upon receiving our first bill. But when the bill came I noticed something interesting… (Maybe I’m just thick, but this was news to me.) Even though you’re not paying interest for the first 12 months, interest is in fact accruing. So not only do you have to start paying interest after 12 months if you haven’t paid off the balance, but you also have to pay back interest for the first 12 months.
In our case, the balance on the account was about $4500 and after just one month it had accrued over $100 in (deferred) interest. Wow, that would be a nasty surprise if you simply took the clerk (and big shiny sign) at their word and believed this to be a truly same-as-cash transaction. Of course, hidden away somewhere in the fine print is the word ‘deferred‘ — as in:
“Your horrendously high interest payments will be deferred until we have a chance to add interest onto your interest which was added onto your interest (and so on).”
So… If you’re thinking about buying something using one of the (not quite the) same-as-cash promos, be warned. You’re almost certainly going to get slammed if you don’t pay it off quick.