Everyday Cheapskate: The Ugly Truth About No-Interest, No-Payments Offers
Have you ever wondered how retailers can possibly afford to offer the no-interest, no-payment, no-money down kind of deals you see advertised? That was the subject of a question I received recently.
Dear Mary: There are several appliances, electronics and furniture stores in our area that run television commercials offering nothing down, no interest, no payments until 2022. It sounds like I can just walk in and take what I want and not pay for three years! How do these companies really make money? -- Kate
Dear Kate: First, these offers are on approved credit and come with a lot of other fine print. You need pristine credit to qualify for those attractive terms.
GOOD LUCK QUALIFYING
One retailer told me only about 25% of the people who apply for these amazing offers, designed only to get buyers through the door, can actually qualify. The other 75% are offered some other deal with horrible terms. People often accept these terms because, by the time they fill out the paperwork, they're so emotionally involved and they have their hearts set on that absolutely awesome "free" deal that they're anxious to sign anything.
TERMS AND CONDITIONS
Let's say you're one of the 25% and you qualify. You have $3,000 sitting in the bank. Now, you could pay cash for that 65-inch Class 4K Ultra HD OLED TV. Instead, you decide to go for the nothing-down deal so you can earn interest on your money until 2022. Furthermore, you still have to fill out and sign a credit application. And that requires a credit check. Finally, you have to agree to very steep interest (plan on 24.99% or more), which is deferred (not waived) until 2022.
The contract will read that if you are late paying that entire balance in full by the appointed time on the appointed day, you lose your deferment, and you owe interest back to the day you signed the contract. From that moment on, you must begin making enormous payments.
Whenever you sign a contract or application of any kind, remember this: What the large print giveth the fine print taketh away.
Most noteworthy, about 78% of the people who qualify for these deals do not pay the account in full at the appointed time, for whatever reason. Life happens. You use the money in the bank for some more urgent situation. That means you're stuck with enormous payments plus all the deferred interest on that TV (or other item) that, by then, is no longer new and is worth much less than it was the day you thought you got such a steal.
My advice? Don't even think about these kinds of come-ons. If you can afford it, pay for it. In full. Now you own it. And if you can't afford to do that? Then make payments to yourself until you save the full amount.
Discipline and delayed gratification are still excellent character builders.
Hope that helps!
Mary invites questions, comments and tips at EverydayCheapskate.com, "Ask Mary a Question." This column will answer questions of general interest, but letters cannot be answered individually. Mary Hunt is the founder of Debt-Proof Living, a personal finance member website and the author of the book Debt-Proof Living, Revell 2014. To find out more about Mary visit the Creators Syndicate Web page at www.creators.com.Copyright 2019 Creators Syndicate Inc.