No Interest! 90-days Same as Cash! A Money Saving Deal for Purchases?

You’ve seen the advertisements offering 30 days, 90 days, 18 months “same as cash” sales. The enticement is that as long as you pay it off within that time frame, you can buy something on credit and not pay interest.  If you want something bad enough you might be tempted to overestimate your ability to meet those terms. Doing so can be costly.

There is no doubt that these offers are effective at generating sales. You might even think to yourself, “I’d be stupid not to buy it.”

But be forewarned; if you don’t pay it off within the time frame in the contract, you are in for a huge shock when the next bill comes around. And some experts say that studies show nearly 90 percent of people who buy something on a “same as cash” offer don’t pay the bill off in time to avoid interest. Once the interest is charged, is it ever a whopping disappointment!

Someone who is stuck without an appliance can be tempted to take advantage of these offers, but when it comes to your finances you should consider other options.

• Buy a used appliance that will do the job in the interim.
• Consider whether you can do without an item for the time being.
• If you must have an item and you must borrow, shop around first. Find the best price and then get the company offering the best credit deal to match that best price.

One major electronics retailer, and this is by no means an exception to the rule, is currently offering 18 months interest-free on purchases greater than $429 if the balance is paid in full within 18 months. You would be required to make monthly payments on the account, but the minimum required would not be enough to pay the item off within the 18 months.

If you hit the target date without paying the balance down to zero, the company then charges you the interest from the first day you bought the item, so you will owe all the interest you didn’t pay over that 18 months. As if that weren’t bad enough, your interest rate is typically between 25-28 percent.

So, for example, let’s say you buy some audio equipment at $500. During the 18-month “same as cash” period you pay down your balance to $100. If the interest rate is 25 percent, the day that interest is charged you will have $125 added to that $100 bill. Instead of paying $500 for the audio, you’ll now pay at least $625 by the time you’re done. And chances are good you’ll take more time to pay down your purchase, sending the cost even higher.

If you are already a disciplined spender, then the “same as cash” deals can be a good solution. If you do pay the item back within the time period you really will pay no interest, but bear in mind retailers inch the price up a bit to make a better profit in case you do meet the terms.

For more on saving money on purchases, visit our website www.americanfinancialsolutions.org or talk to a counselor today!

Published Mar 26, 2014.