Check it out. Say you are in the market for a really nice flat screen TV (I’m not). You have been saving for the TV for quite some time and have narrowed it down to the exact model you want. You know it’s gonna cost you $3,000 and you think you got everything all figured out. Then, out of nowhere, a curveball comes your way. The Best Buy employee asks if you’d be interested in their “0% financing for 12 months” option. What do you do? What do you!
I never thought I would sign up to finance anything, ever, but something about that nice and round “zero” is tempting. Maybe it’s like a donut though. Looks good, tastes good, but once you eat it you immediately regret your decision.
I have read some whore horror stories about people who signed up for 3 months of 0% financing, only to find out when they tried to pay their balance in full (at the conclusions of their 90 days), they were slapped with some ridiculous early payment fees…apparently the contract they signed stated you couldn’t pay your balance off for 12 months without being penalized.
I know there are some 0% finance scams, with incredibly shady terms. But (Yes, I just broke a rule and started a sentence with “but”) there also appears to be some that are rather legitimate, namely those from larger companies.
So the question is bloggers, do I play with the devil, knowing I could minimize the impact of a four figure purchase by splitting up the cost over a 3, 6, or 12 month period. If you were gonna drop $3K on the TV would you take the free financing or exercise sound financial knowledge and pay for the sucker up front? Anyone have any experience with the 0% financing game?
I don't know much about those offers, but I'd probably just pay it all at once if I have the money (and don't need it anywhere else). Not only do I get it out of the way (you don't have to deal with the fear of getting the math wrong and screwing yourself over), but I also get all the rewards points at once!
I've taken advantage of these type of offers at Best Buy and Frys without any interest charges or hassle.
It's nice to keep your money working for you while you spread out the payments at no cost.
I've heard of people who haven't paid it all off by the end of the term, and then get slapped with interest (whatever it is after the 0% introductory term), and not just interest for what's left in the account, but for the ENTIRE purchase. That's just a rumor I've heard, but it seems like another good reason to not bother.
I agree with QL girl, go ahead and get all your reward points on your preferred card! Plus, opening another card or loan or whatever they call this is going to ding your credit report, wont it?
I did take the finance offer from Best Buy I also signed up for there rewards program and because it was my birthday month I got 3X the rewards points. The Pioneer TV I bought was on sale $1500 off retail down to $1999. The 3X rewards meant I would get $120 Store credit bringing the total price down to $1879. Then financed it for 0% for 12 months and have been making regular payments. I put the money into a high yield savings account which I use to make regular payments to the Best Buy account. In the end I'll maybe gain $30 in interest (if that) which brings the TV down to $1850. Plus I can use that money to count towards my emergency found as long as I know i current have more money coming into supplement. In that end that's one hell of a deal for a TV that I would have been willing to pay a whole lot more for!
Since you know how to budget for things and how to pay things off, go for it. It can help build credit and squeak a treat into your budget.
We financed 'our' new TV (well DH did without asking me) and our living room furniture. While we could have paid both off immediately, we just set aside the correct amount every month to pay it off and kept the remaining money in the bank for interest and a little extra emergency cushion.
Just make sure to read the fine print very, very carefully and be sure to pay it off a month or two ahead of time. If you screw up and it's not paid off at the end of the term you WILL get smacked with the entire interest payment (at some unholy rate), finance fees and whatever fees they feel like tacking on.
So for people with budgeting skills and willpower, it's awesome. For people who are flaky with payment schedules or on shaky financial grounds it's a really crappy idea.
I've taken advantage of several of these offers. Mainly on a huge furniture purchase. While, I've been diligent and made sure payments are on time and that I paid things off by the end of the offer, I will admit that it is more stress than had I paid it in full.
Also, I have used a 0% cc that was strictly for dental work. This one is tricky because they offered 0% up to a certain amount (say $2k), but your credit limit is $3k – so anything charged over that is slammed with a ridiculous interest rate. You just have to pay attention (which is obviously easier said than done).
Even though I've used 0% offers, I still recommend the pay in full up front method if you can. For peace of mind. And less stress.
This is a good idea only if you are disciplined and will take the time to read and understand the terms. Many places that offer 0% interest for 12/24/36/etc months do so as long as you pay the entire debt before the time limit. Many times the small print says you will pay the interest on the entire purchase if you go over your time limit by even one day. Just make sure you take your glasses and read that fine print, and don't worry, you're smart enough to not get punched in the face.
I've heard this called "leveraging credit effectively" and the example given was with a car. If you are looking to buy a car for 22,000, and have money, but are offered 0% financing, the article suggested you open an account and put the money you saved to buy the car, and start it on automatic withdraw. If you need the money for some type of emergency or an opportunity comes up that you would like to take advantage of, you have the cash on hand to do it.
However, if you're going through a store who offers, they are looking to make money even more than you're looking to save it, so read the fine print carefully.
Don't do it!!
Save up for it, and pay with cash. Yeah, it sucks b/c you can't have what you want NOW.. buuut let's say you find this awesome $3000 TV set… take 6 months to save for it, and you can probably get the same set for $2500….electronics depreciate sooo fast!
I have used the 0% for 12 months and have paid off my purchase, but I also have used it at Sears for my washer & dryer and I didn't pay it off before the 12 months and was hit with a lot of interest. The sad thing was I did pay it off in the 13th month with all the interest.
i wouldn't do it. you never know what your situation will be in 3 – 6 – 12 months and sure you might have some interest then, but i don't think it is worth having it to stress over. and you could accidentally miss the payment and owe even more.
oops…just noticed your comment about fabulously broke. never mind.
I don't know if the state you'd buy the tv in has the same rules as ours, but when we bought our tv from best buy they added on a monthly "debt protection" charge that ended up being $30 or so dollars a month. So technically there wasn't any interest, but there were extra charges. We were quite annoyed when we saw the bill.
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