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blakeh95

One note to folks looking at store promotions vs. balance transfers (because this gets said a lot in those posts too): **0% APR is a protected term.** If you see the words "0% APR", then the company ***cannot*** legally charge retroactive interest. If they do anyways, contact the CFPB. ***However*** (and this is the key point), I bet a dime to a dollar that is doesn't actually say 0% APR. Instead it says "No interest if paid in x months" or "Special financing" or whatever else combination of words that imply no interest but don't say 0% APR. **These are** ***not*** **protected.** If you see wording like this, it absolutely ***can*** and ***will*** charge retroactive interest.


AlreadyShrugging

Can confirm. My former employer used to handle the Best Buy (and dozens of other retailers) credit card. Frequent 0% APR promotions and stores were generally terrible about taking down signage after sales/promos ended. We constantly had to zero-out interest charges. It eventually got to the point where we fired Best Buy as a client and some other bank gets to deal with them.


blakeh95

I know my Best Buy card is with Citibank now.


goodsuburbanite

I just thought that same thing. I only buy things from best buy when the 0% finance deals are available.


lenswipe

What's the deal with 0% financing anyway? Is there some special incentive to doing that vs just buying it upfront? EDIT: Thanks for the replies folks. I get it, don't pay now... Invest


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lenswipe

Oh for sure, I just wondered if there was a financial incentive to doing that


Shatteredreality

So an example "incentive"... Let's assume you have the money in the bank to pay in full upfront but are offered 0% financing over 24 months. Even if you only have a savings account your money can "work" by earning interest for you while you work to pay it off. Now to be clear this shouldn't be used to justify making a purchase you wouldn't make anyway and you need to be responsible and make sure you know the terms you agree to but it's a valid financial strategy. This is especially true if you want to purchase something expensive like a car or a house. If you have 500k in the bank to buy a house and can get a 3% loan on it it might be a better idea to take the loan, throw the 500k in a CD or maybe even invest it (the historical average for the stock market is a 10% return but keep in mind there are risks in doing this) and let it earn interest/grow. As long as the rate of growth is higher than the interest you accrue you end up making money this way.


Overmind_Slab

Also, consider that these purchases are just a set number of dollars, not an actual value. So if I can choose to pay for something today for $500 or pay for it a year from now for $500 that in a year $500 is worth less than it’s worth now due to inflation.


How__Now__Brown_Cow

Inflation is (usually) negligible over a single year. The time value of money does mean today dollars are more valuable than tomorrow dollars, however.


laxpanther

A wise person once said to me - if a bank is gonna lend you money at 3%, you make sure you take every dime they are going to lend you on as long a term as they are going to lend it.


kristallnachte

Yup, I'm not a fan of debt, by the auto loan I got was 0.9%. I had zero intentions of paying a single dollar sooner than I needed to.


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stealth550

You probably can't in the us currently, but historically that has been an option over various points over the decades


adventurejihad

The financial incentive is you have more cash in the current month to put towards your 401k or whatever, which typically gets a higher return than holding the cash


testosterone23

It's about leveraging your assets, why spend the cash you have, if it can work for you while you use OPM(other people's money) for free?


nn123654

While I agree with the financial sentiment, I don't see this as a risk worth taking. If you elect deferred interest and misunderstand the terms of the agreement or mix up a date and end up paying 30% APR, you'd wipe out the profits from doing this dozens of times. The risk isn't really worth it for such a short investment period.


testosterone23

I agree with you on the risk portion, hence why I don't do it. Right after this comment I reflected on why I don't do this more often, and fact is, we're not talking about enough money to make the risk/benefit profile work in our favor. If we're talking about larger amounts of capital, sure, leveraging assets is status quo, and not doing so leaves you at a disadvantage. The lost "gains" of $1k at <1% interest rates is a pittance.


ColdFusion94

They are relatively forgiving if you do miss your mark, and you can always check when the term expires with your online bill pay and set up an auto debit that takes care of it without any further thought. This is how I manage it.


mon_iker

There's no free lunch, that's the risk you have to be willing to take to get what is practically an interest free loan. I set a reminder on my phone and forget about it till it reminds me after a few months, and then all I need to do is log in and pay it off.


rhymes_with_snoop

Well, for example, if I have $2k on hand to buy a couch (and I *need* a couch), and approx $2k left that I owe on my car, and the furniture store is offering 0% interest for 6 months, I can just pay off my (interest accumulating) car loan and make those payments toward the couch instead (with no interest). Basically, if you have any other debt, it is beneficial to take that money you would have spent and put it toward a loan that does have interest. Also just potentially easier to budget. Like being able to pay in two installments instead of everything up front.


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fargonetokolob

Other than whats been stated already, these deals are often incentivized with some other deal, such as a $50 credit to your account if you make the purchase on said card.


lizerlfunk

I had to replace the air conditioner in my rental property. I was able to get a credit card with 0% interest for 12 months, and put the new AC on that card. I pay a chunk of it every month when the rent comes in, and it will be paid off by the time the 0% period is over. Financing at 0% and keeping a cushion of cash in case of other needed repairs was the best business decision in my case.


juanzy

For me, I use it because it helps me budget better if I can spread a big purchase within a couple hundred of my monthly budget instead of pulling from savings on a big purchase. Have done it for the better part of 8 years now and haven't paid a dime in interest, works for me, just requires understanding what strings come with the 0 interest.


sold_snek

People who otherwise can't pay it up front, or would like to not put as much up front right away (inb4 someone says "If you can't pay it cash twice over you can't afford it" etc etc). You can defer it with credit convenience without having to pay. Unless you don't pay it off on time, obviously.


lenswipe

Of course, yeah. I mean, I'm not trying to be one of those "jUst stOPp bEiNG poOR" dicks. I just wondered if there was some kind of positive financial incentive for buying it installments.


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IsThatYourBed

Your money is worth less over time. You can be saving literally pennies! Maybe a few dollars if the sums are large enough or the term is long enough.


Susano-o_no_Mikoto

To get more people to buy stuff. Just another way to sell items faster. Also if its for 12 months or so, a LOT of people usually NEVER pay off their fees before the end of the promotion.


ipoopedonce

Just spread out your payments. Basically you can keep your money longer and do whatever with it. I use it for major stuff so I don’t have to fork over $1000 and can use it for interest bearing savings or whatever (nowadays pittance)


lenswipe

That's an interesting perspective. I hadn't considered that. Maybe next time I buy something expensive I'll do that instead of buying upfront.


JL5455

I recently did this with a hot tub. I had saved up the $12k but when they offered 0% for 5 years, I put $2k down and moved the other 10 to a money market account.


Tsarinax

My wife and I bought our new iPhones using the Apple Card, which offered 0% financing for 2 years while still getting 3% back. I normally won’t give up credit card rewards for 0% financing, but if I can get both for large purchases it makes sense.


Choklitcheezcake

Hey! I did the same thing for my MacBook in 2018 and it’s since been paid off and now the card is just... there. I never use it and honestly probably won’t. Should I close it? I’ve read that it’s bad to open and close accounts but how else would you take advantage of these 0% financing promotions?


Tsarinax

As long as the account doesn’t have a fee to keep open, and the Apple Card doesn’t, there’s no reason to close it. Just toss it into a sock drawer in case you ever need it again. It has a good UI on the phone anyway and carrying it is mostly pointless if you have any other card. It’ll help your average age of credit by just leaving it open.


TehBanzors

The benefit is the ability to leverage the money into investments. For example I'm making a hypothetical $10,000 purchase with 0% interest. I then invest $10,000 into a 5% apr account. Then 1 year later I withdraw my $10,500 effectively getting my $10,000 purchase and an additional $500.


merc08

If it's a large enough purchase and a long enough period, it can be better to keep that money in any account that is earning interest - savings account, stocks, bonds, CDs, etc. There aren't a lot of things that Best Buy sells that really fall into that category though. Maybe a large TV. $5k at 5% for 6 months is $125 you could save. So weigh whether that's worth the risk of not paying it off on time, the risk of not making that interest rate (or the investment losing value), and also factor in that you'll make less and less in interest as time goes on if you're paying it off incrementally rather than lump sum at the end. There can be a cashflow benefit to paying it off over time, without interest, but that can also cut the other way and make you more willing to spend money you don't technically have if your accounts look fuller. Technically you also come out ahead on the inflation rate, but these promotions are typically short enough terms that it effectively doesn't matter. TL;DR - don't bother if: it's a small purchase; if you aren't going to keep that money invested in a high yield account; or if you don't want the extra work of tracking a short term account. DO take advantage if you will put that money into a high yield account to generate interest, the projected interest is worth the effort of tracking this additional account, and you're willing to risk the principle in the investment and still pay it off on time.


fgyoysgaxt

It's more efficient to get the item when you start saving up for it, rather than after you've saved up for it. The extreme example would be houses, most people get a 20+ year loan. It's nicer to live in the home for 20 years while you pay it off, rather than save for 20 years then buy it.


emmster

I did it once. My stove crapped out, and knowing I had a tax refund and a bonus check from work coming in the next few months that would pay it off, I figured why wait?


BlackKnivesMatter

Its even worse that it's 0% financing through best buy. There is nothing in best buy worth going into debt for. I can't imagine going into debt for a phone or a TV, when cheap ones are so freaking good these days.


senoritarosalita

They do sell essentials like refrigerators, ovens, washers, and dryers. I did this earlier this year when my dryer unexpectedly quit. I was able to buy one and pay it off in 4 months.


FluxMool

I had a BB card for years and dropped the card recently as Citibank would charge me a fee for each purchase for using the credit card....BB would send me coupons for money off and it was a wash when the fee came up a few weeks later. Pissed me off. Canceling the card was pretty easy tho.


EuroDucky

Is this why Best Buy switched from Cap1 to Comenity? 😅


AlreadyShrugging

If I recall correctly (this was years ago and I’ve since separated from Capital One), we even offered to bring Best Buy’s practices into compliance and pay for it all. Best But refused. Our call center staff always dreaded calls from Best Buy card holders because 90% of the time the customer was raging pissed off before they even called us. It was almost always due to a customer being offered 0% in store and then not getting it. Our entire office cheered the demise of that partnership and even threw a party on the last day.


BonerSoupAndSalad

I don't think Comenity had them very long and they are on Citi now.


BlackFrost92

I used to work at Best Buy (small world) and I was honest and upfront about that that they'll hit with the retroactive interest if dont pay it off entirely. Got a lot of thank yous for that


AlreadyShrugging

We need more people like you in jobs like that.


Sporadicus76

Second this. I have a Firestorm card, and all seems well and good until you reach the end of that 6 months. THEN you get a whopping 29% interest combined with the compiled interest they have been waiting to give you for the past 6 months.


TerribleEntrepreneur

It's actually interesting because it's almost reversed in Australia. When you get a phone with a contract they say "pay $0", and can't legally say "it's free". Because it comes with a 24 month contract for a tied phone plan, therefore it isn't free because it does incur cost. Source: Used to work for Telstra and they drilled into me that I could never mention it's free, only $0 for legal reasons.


9851231698511351

If I had a dollar for every $0 invoice I've sent out to "customers" I wouldn't have to send out $0 invoices.


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blakeh95

From the [Truth In Lending Act (Regulation Z)](https://www.consumerfinance.gov/rules-policy/regulations/1026/Interp-16/#16-h-Interp): Deferred interest or similar offers also do not include 0% annual percentage rate offers where a consumer is not obligated under any circumstances for interest attributable to the time period the 0% annual percentage rate was in effect, though such offers may be considered promotional rates under § 1026.16(g)(2)(i).


Werewolfdad

I'm going to save this and use it as a copy pasta since its excellent


pjabrony

We need an overhaul to the protected-terms and false-advertising laws. The standard should be that if a reasonable and prudent person would think that it means something, that's what it means. Normal people don't read fine print.


runs_in_the_jeans

Deal with Synchrony every day. Can confirm. We inform our customers of this before we run the sale to make sure the customer understands.


DMoree1

Thanks for the info! I have heard of people being conned by these types of places, but didn’t know that the term itself is protected. Should be easy to spot knowing this.


unittestes

It took me way too long to realize that they were under charging you on your auto debits. We're so used to look for scams that overcharge you, that I actually find this brilliant ! Would have definitely fallen for this one.


Get_off_critter

Ya know i was looking at ashley furnitures website and thinking their posted monthly payments werent adding up....i didnt do the math cuz i was just browsing but still


troutscockholster

Even worse, there could be a "rounding error" so the payments look like they are paid and then the last payment is 1 penny short and you are stuck with the entire interest amount.


Get_off_critter

Ugh ive heard of that.


MyTrashCanIsFull

That's why I always set up my own monthly payment for these deals. Used several of them and never payed a dime in interest.


fargonetokolob

Oh, that's what I missed from OP! The RETAILER set up the auto payments?? Wooow that's pretty scammy. I just thought OP hadn't chosen the correct amount for the payments.


Particular_Nature

The ‘pay ALMOST’ all of it off during the promotional period is new to me. Usually when I’ve done special financing promotions, the minimum is something ludicrous like $25/month on a one year promotion of a couple grand. This store was much craftier.


NothingThatIs

I have only seen this version, my furniture store did something similar to me $3800 over 2 years at 0 percent but started the payments a month late so if I didn't catch it and make two payments at the end I would have been over the purchase date plus 2 years but the minimum payments were the correct amount. Thanks to this subreddit I knew to look for it.


FatBoyStew

Sounded like the retailer setup the minimum payments. I'm in the same boat as you, the minimum payment required by the creditor is stupid low usually. On my $3500 kayak purchase it was like $50 a month which would only come to $900 over the 18 month term.


87880917

Every single 0% promotional purchase rate through that’s through a store credit card that I’ve ever seen has worked this way. You have to take the original purchase amount, divide that by the number of payments in the promotional period, and use that for your monthly payment when you set up your auto-draft. And make damn sure that final payment is processed before the deadline.


ialsoagree

I have made it a habit that if I have one of these deals, I ensure that the balance is paid the month before the last month of the promotion. So if I have a 6 month promotion, I have the balance paid in full on month 5. That way, if there's an issues with my payments going through, or the company is trying to screw me in order to charge me interest, I have an entire month to resolve the issue before they can even think about charging interest.


SausageEggCheese

I came to say pretty much the same thing. I usually try to avoid buying anything I can't pay if right away, but a few years ago I had something that was too much. It was 18 months no interest, but I noticed the monthly payment only paid off about 75% of the item. So I just divided the full price by 13, and paid it off in just over a year so it wouldn't even be close.


ialsoagree

I take these deals when there isn't an alternative (like cash back, or something). Like you, I only take them if I could pay for the item out of pocket to begin with - but it's nice to keep the money in my own account for a few months. My credit union offers 2% APY so even $1000 over 6 months adds up pretty quick.


merc08

2% APY on $1k over 6 months is only about $10.


ialsoagree

If you're saying I can get $10 for free every time I do one of these promotions, great. If you don't care about $10, feel free to send it to me. :)


merc08

It really depends on how much time and effort you put into tracking the account to make sure you don't miss the payments and trigger a massive penalty. If everything goes smoothly, then you can count it as a free $10. If you end up having to fight with the company about when your payments were submitted, then you start entering the "working for less than minimum wage" territory. If it takes you 5 minutes per month to log into the account to ensure the payment went through, you're sitting at an effective rate of $20/hr. If you have to call them a single time and it takes 45min, your effective rate just dropped to $8/hr.


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importvita

This. I've messed up once (and only once) by not paying something off on time but luckily it was such a small amount I was only charged $7.15 in interest. Never again though and I consider myself lucky it wasn't a larger amount.


[deleted]

You also have to make sure that your payments are spaced out so that each payment falls within one of their payment periods. I had a Discount Tires credit card through Synchrony Bank that had a 21 day payment period. I managed to make one payment too early and one payment too late (within the same 30 day period) which voided the zero percent interest deal & resulted in a late charge. I took over an hour on the phone to get the late fee removed. As soon as I did, I paid off the card and cancelled it.


MaskofApath3

Nah, pay it off and then ask to be switched to paper statements. That way they are spending money every month to send you your statement of $0.


winsomelosemore

Petty revenge is great but this is a needless waste of paper. Exact revenge by not being their customer instead


XediDC

PayPal's credit system seems to actually handle this rather well. When you go to pay any balance, it shows at the top a list of 0 interest promo purchases and when they need to be paid off to avoid interest. And on the payment part, there is an amount listed that needs to be paid to avoid any interest as well. They have their issues of course, but appear to be remarkably up front on this part.


Caravaggio_

It's just simple math. If I bought $2400 purchase with zero interest if paid in a year. Divide $2400 by 12. So $200 payments. I would try to pay it off in 11 months so I would pay $220. I don't know why people make it harder than it needs to be.


[deleted]

Yeah I’ve heard people say you should also just over pay your last payment to be safe. Worst case, in a few weeks you get a check for the difference. When I go to finish off my car payment you better believe I’ll be over paying by ablut $20


87880917

Why? A normal car loan doesn’t work the same way as these special financing deals...you won’t be charged interest in arrears like you would on these store credit cards. Your final month’s car payment will be a similar amount to your normal monthly payment. Whatever the amount of that final payment is, just pay that.


KelseyBee17

I work at a furniture store and the staff specifically tells the customers what your monthly payment needs to be to avoid interest. Another reason why it’s nice to purchase from a family owned store that cares about keeping their customers happy. Does us no good to make a customer upset about something that originated at our store, whether it’s our cause or not.


Bukowskified

We had to replace our air conditioner (hooray home ownership), and the company we went with offered two years “free financing”. Sales guy made a point to explain that the bill we get in the mail doesn’t actually add up to what you need to pay in order to get the “free financing”. He said that he gets calls from people two years after they buy an air conditioner when they get hit with a huge interest fee due to failure to pay off the loan in the time limit. Super appreciated that he took the time to point this out, and we are going to pay it off a good two months early just to be safe


rosen380

IMO, that would be my reason to call someone else. If there is no "free financing" if it isn't paid in full by the end of the "free financing" period, and they setup payments that won't satisfy the requirements, then it seems their goal is for you not to get "free financing".


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Bukowskified

The financing is done through a second company not the one who sold/installed the new unit. They had the best price and came out and installed it the next day


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KelseyBee17

Yes. We do price match. And honestly, our prices are actually comparable otherwise we wouldn’t stay in business. But you also typically won’t find the same furniture either. I think the only furniture we sell that you can find in big box stores is Ashley, which is just junk anyway. Mainly, the reason you should by from a place like where I work instead of big box or online is that we will take care of you if there is an issue. The entire business relies on satisfied customers in a regional area. If we keep having customers that are elated in our service, they tell their friends and family to buy at our store. If a person has a bad experience, same thing happens negatively and we could lose out on a lot of business. Big box/online stores don’t have to care about that. For example: I had a guy that bought a recliner and picked it up at our store. They decided to not tie it down (customers responsibility and we have signs saying so) and on their way home it flew out of their truck bed and busted into pieces. What do you supposed would have happened from a big box store? “Sorry, too bad.” Our store gave this guy a $300 credit towards another chair even though we absolutely didn’t have to. This is just one example of many that I’ve seen the owners of my store do to make their customers happy, even when they don’t have to.


Csherman92

Typically you can negotiate the cost of furniture FYI. If you have the exact same item, which is unlikely but possible—they will probably sell it to you for the same price as the big box store. Just tell them and show them a picture of the same item and they usually will match it because they want your business. Big box stores are unlikely to match prices, because corporate tells them what they can charge.


uberhaxed

>Big box stores are unlikely to match prices, because corporate tells them what they can charge. Apparently, this isn't true. Many years ago, I bought a house and my mom (who is from the Caribbean) visited me to go shopping with me to get me furniture to fill my new house with. We walked by a mattress and the sign said $200. I kid you not, she called an employee over said said, "how about $50?". He replied, "The best I can do ma'am is $100". She then countered with, "$75 and free shipping". Dude just took the deal. Apparently, I have been doing this whole shopping thing wrong. This was at Ashley's in Orlando, Florida so huge corporate furniture store in a large city. Like, who can look a man in the eye after he says 100 is the best he can do and go lower? Also what kind of margins are there to get over 50% off and make a profit?


KelseyBee17

I work in the industry and Ashley is an exception because their stores are specifically for their products only. There is no middle man when buying at an Ashley home store. But also, their stuff is so cheap and junky that they have crazy margins anyway.


Lyress

Ikea also sells their products only and you can’t negotiate.


Csherman92

I used to work in the industry. And their stuff is so junky


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Mgnolry

I used to live in the Caribbean. I am not surprised that your mom wiped the floor with this sales guy.


Csherman92

Must’ve been a manager and they had been trying to get rid of it! Also furniture has a gross markup which means they can go down if they want to and still make money on it


DiggingNoMore

Same reason I buy my DVDs from the local mom-n-pop shop instead of Amazon - they appreciate and need my money more. Rather give them my money than line the pockets of a billionaire who treats his employees like garbage. I'm not interested in the race to the bottom.


triciann

I called up a local mom and pop shop for a price. They called me back and gave me the same lowest price I could find plus free delivery. They would have to be stupid to not price match.


[deleted]

Thanks for this post. We bought a $1300 couch from Ashley Home Furniture at 0% for 12 months. I just asked my wife how much we've been paying ($45/month) with $995 due by March 29, 2021. At that point, 29.99% interest back to the date of purchase if the whole promotional amount was not paid off. This post saved me around $400!


Cr3X1eUZ

Put a reminder in your calendar app to make sure you don't forget.


Werewolfdad

https://old.reddit.com/r/personalfinance/comments/g9p1em/beware_the_0_promotions_a_warning/ This thread? Great thread


blakeh95

My only gripe (as I detailed in my other comment) is how many people say "0% APR" cards/offers do this. I guarantee you it doesn't say 0% APR (otherwise a call to the CFPB is in order), but instead says "no interest..."


HowDoesIAdult

Marking this cuz im gonna want to come back and ask a question later


Mr_Kools

THATS THE THREAD! THANK YOU u/naht_a_cop!


damonian_x

The lady who just sold me all the furniture I used to furnish my first apartment actually told me this upfront and told me to make sure I pay extra each month on it and pay it off the month before the 12 month 0% interest period. Super cool lady


jbFanClubPresident

When I was in college, I worked at Best Buy and my coworkers and I were always upfront about this. In fact, that’s exactly how I learned about these “scams”. We didn’t work on commission so we didn’t care if they paid interest or not.


electricgotswitched

>Why pay it all upfront if I can do smaller payments for free?? Right??? To just get it over with and not potentially deal with things like this


ke151

Totally agree here. Technically maybe it's financially optimal to invest that money or whatever, but I loathe any sort of recurring payment so can't imagine intentionally signing up for another one for a non-essential item.


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HowDoesIAdult

Worse still is you would not have 6 months of gains pf 1400, because you need to be withdrawing from it each month to make payments. The one argument that may make sense is liquidity, but one way or another you need to pay the couch in 6 months so this amount for such a short period still doesnt make a huge difference


MedEng3

>Worse still is you would not have 6 months of gains pf 1400, because you need to be withdrawing from it each month to make payments. I'm making $1.75 from this couch in my HYSA! ;)


norsurfit

Your couch is basically paying you to sit on it!


spockzilla

Would probably find that amount of loose change in the couch over those 6 months anyways


opentraderx

If 1400 is the difference between being liquid or not then you probably shouldn't have bought a 1400 couch.


crimsonkodiak

Seriously, it's a couch. If you can't pay cash for it, you don't need it. Buy a $100 futon from Walmart. Or sit on the floor. A couch isn't worth going into debt over.


deezycaprese

Thank you! I get so exhausted by people who give me a hard time for never financing things. I just want to be done with things, not have them linger.


Econ0mist

> To just get it over with and not potentially deal with things like this Also, if you pay with a credit card, you earn rewards and benefits (cashback/points, purchase protection, price protection, extended warranty). You don't get any of that if you finance the purchase with an installment loan.


twotall88

That depends on the same as cash deal. I know Lowe's and Home Depot's same as cash lines are credit cards so you get similar or same protections.


AlreadyShrugging

They are *much* weaker protections than those offered by branded credit cards (Visa, MC, Amex).


huck500

I bought a TV from Circuit City years ago (right before they went out of business), and got a 0% deal with the typical 'pay it by this date with no late payments or pay all the interest' deal. They (whatever bank they used) legit just didn't send the first bill, or I guess maybe that was the one piece of mail that got lost on its way to me in 20 years... I went online and just paid the whole thing at once so I didn't have to deal with their sketchy shenanigans. Sometimes saving a few bucks just isn't worth the worry.


Outrager

How would you know if mail got lost if you never received it? I'm sure, at the very least, some spam got lost.


wamih

I needed to upgrade my work photography equipment, about 2 grand worth of camera equipment... The store I shop with was running a 6 month same as cash deal, so I jumped and got about 2 grand worth of equipment, financed at 0% for 6 months, I had the money and could have paid it off any time but cash flow this year has been off so made the 5 minimum monthly payments and paid it off a week before the 6 months was up.


JJJJShabadoo

Yes, this. These deals are playing with snakes. Harmless, until you get bit. Snakes bite. It's in their nature.


massa_cheef

>I had read a post some time ago about the hidden fees from furniture store promotions and their 0% interest deals. *All* 0% interest for X period of time promotions are this way. It's not just furniture.


PA2SK

Only store cards. Bank credit cards cannot do this anymore, it was banned by the CARD act.


sweadle

I have two credit cards that are that way now. The CARD act says you can't retroactively raise interest rates, but they can still retroactively charge interest.


bicyclemom

All **any** interest for x period should be examined for this. Not just 0% ones. In mortgages, this was known as balloon payments. An APR loan where the interest was very low for the first 5 years, then ballooned to some outrageous rate thereafter. Tons of people were caught by this in the early 00's.


Cr3X1eUZ

Balloon payments were a different kind of loan, but if you were expecting to be able to refinance when the rate switched it had kind of the same effect.


[deleted]

I have the same scenario when we outfitted our entire house and financed at 0% over 5 years, however the monthly payments times 60 do in fact lead up to the entire balance of the purchase. my plan is to actually pay it off in 3 years anyways but they do have those terms in there where they will charge the back interest if you either miss a payment or don't complete it within the term of 60 months.


frogs_4_lyfe

So I work for a bank who does these kind of promotions, and tbh there is very little hidden about these promos. It's plastered on the front page of the statement all in caps locks for the entire promo term, and the terms are again listed as well as all penalties on every statement. You can't use the excuse that you didn't know when the statement even says paying the min due will not pay your promo within the term time. At some point you gotta stop blaming everyone else and take responsibility for your own finances. Credit cards don't send you statements every month because we hate trees, we actually do expect you to look over them every now and again.


zoenphlux

I don’t want sound too harsh on the OP or others, but I agree. This stuff feels rather trivial for people who budget and keep an eye on all things debt. I have a paypal account with a 0% for anything over $99 , and it does the same thing. It’ll charge me interest If I don’t pay the financed amount within 6 months. What do I do? Pay it off in much less than 6 months to avoid missing it. The min will NOT make that work. One of the first things I compare when I consider financing something like this is the financed amount vs full amount. I would probably call them out at the store for “This doesn’t add up”. Too many deals are 0% but bake in interest via fees. Like apple care. It’s “0%” financing, but doing the math is was like 18% interest because paying up front is 199. Paying monthly is 10 x 24 months = $240. It’s $40 more for paying monthly overall.


rajuabju

While I agree with you that generally that ignorance is no excuse, and the terms for these types of promotions are not hidden, the issue in this country (US) is that financial literacy is no longer taught in schools. Therefore, even though it’s right in front of them, many people simply don’t understand what they are looking at. Also, the banks and furniture stores running these promos know this. Which is exactly why they run these types of promotions in the first place. Otherwise they could just as easily set the default payment to ensure pay off without any deferred interest kicking in.


flossdiddy

Well that’s clearly stated prior to purchasing if it’s not paid in in the time before the rate changes from zero, the entire purchase and back days interest will get charged. Always pay them off before the final due date


Mr_Kools

I guess I had just assumed that the auto debits they set up at the beginning would pay it off in that time frame. Turns out - it would not have.


twotall88

Auto debits that are not set up by you default to a percentage of current principle balance. I believe this gives you diminishing returns or is figured from the beginning not to equal the total amount. If you set up an auto debit for $1,401.69/6 then your monthly payment will be $233.62 for 6 payments and you set up your payment date to be at least a week ahead of the due date so there's no way it can mess up. I also go in on the final month and pay it off early to avoid that issue.


Diesel-66

6 month interest free, no that is a huge assumption on your part. You could have checked by simple math. If your payment wasn't ~233, there's no way you're pay it off. If it was years it would be a different story and assuming is more logical


Mr_Kools

You are right.. I definitely should have used a calculator! The payments were 220.. which sounded about right in my head without thinking about it. But it would have left a balance of about 100 bucks.. and then they would have added all that deferred interest to it. :(


JJJJShabadoo

>But it would have left a balance of about 100 bucks.. and then they would have added all that deferred interest to it. :( Make no mistake, this was by design.


FawksB

Yeah, it's a common pitfall and tactic. For example, I got no interest for 36 months on my mattress and the minimum payments take 37 months to pay off the loan. At 25% APR if I defaulted, I'd easily be paying that bed off for 6 years if I just did the minimum payments. **ALWAYS** overpay the minimum on no interest deals.


appollo2020

Most people don’t think about actually calculating it out. I know that I have made that mistake and just assume that if a minimum payment is set that should take care of it if there’s no interest. Luckily I to caught it in time, but, it’s a very easy mistake to make


wanttostayhidden

It wasn't just whoever you were dealing with here. That's how they have all worked for me. I do my own calculations and make sure I pay it off a month early.


sweadle

You're making a bet with the company. They're betting you 12 months interest that you won't get it all paid off by the set date. You're betting that you will. If you look at it this way, it's a super easy bet to win. But you don't make this bet, and then let your opponent set up your payments.


Csherman92

Seriously these zero interest deals all work like this. I always did the math with someone What their minimum payment should be to pay it off. There are some people who do not understand zero interest. Read the card agreement. If you do not, you have no one to blame but yourself. My husband didn’t understand how this concept worked either. He made a payment decision without me and it costed him more money.


rickle3386

Learned this the hard way many yrs ago. I haven't done the 0% for X months / yrs since. If I can't pay of it from checking / debit card, I don't buy it. Has made a big difference in my life.


Cr3X1eUZ

They made more sense when you could keep cash in the bank at 4% interest, but not when banks are paying 0.01%


OMG_GOP_WTF

I always calculate the payment for 10 instead of 12 months to make sure everything was paid on time.


bedroomguru

I own a retail store and for all of our customers, we round up to the nearest financed $100 amount and divide by the term. In your case, we would have told you "be sure to pay at a minimum $250 month. Keep $250 in your head, this way after 6 months if you forget and you made all 6 $250 payments the bank will owe you a refund." We get it out three times. My conscience is clear if we've told customers 3x what they should commit to monthly. We also tell them it's 29.99% interest back to the day they originate the contract with us. In my case what's really shitty is these banks, at least with us, make money on both ends. From us when we originate and when the customer goes beyond the promotional period. These no interest promotional rates of 6-60 months cost us anywhere from .99 - 17.99% of the total sale financed and this includes the sales tax too, which means we lose money on the sales tax we collect, and in turn have to pay. Often we ask customers to at mimimum pay that portion directly to us.


F8Tempter

most zero interest deals for x months have this term. what's bogus here is that the 'differed interest' would be like 100% APR.


PA2SK

Only store cards. Bank credit cards cannot charge retroactive interest anymore


[deleted]

One really has to study a business structure. They aren't furniture dealers first, they are credit companies first, predatory lenders that have attached a tangible item or service to their scheme. You can find it from tires to tax refunds. Some people have had tires seized while shopping and some people have had their entire tax refund "loans" eaten up by fees.


Zithero

I always take advantage of the free interest payment option and pay it off early. 6 months no interest? Plan to pay it off in 5 months. 12 month? 11. And make sure there is not a single penny left in the account once the 6th month rolls around.


bumsnnoses

Same thing happened to me when I bought my mattress, got it on a sale for a $600 price tag which was a steal, considering it was a 1k mattress, paid 1200 for it because never bothered to do the math.


hx19035

What's this interest and financing you speak of? I use local neighborhood socials and buy rich people's furniture once they decided to divorce and get rid of everything. All my shit is name brand and made with real wood. Real life interest free.


cfergie16

That’s how I get all of my tools too! Why spend extra money and get into debt from the “snap-on truck”, when there’s an ex wife trying to sell $2000 dollars worth of tools for $100 out of spite! ;)


[deleted]

So let me know if I understand this. You buy a couch for X and pay it off over 6 months with 0% interest. They tell you that if you pay it off before 6 months you get 0 % interest but if you take longer than 6 months you get charged 50% interest upon the ENTIRE thing, not just what you still owe? So they purposefully made it so your auto payment over the 6 months would leave an amount to still be paid forcing you to pay the 50% interest on the entire X.


Mr_Kools

Yup. That's exactly it. Had I not checked it.. the payments they set for me would not have paid it off in time to not get the deferred interest. Should have checked on it earlier. Got lucky I realized it before that happened.


[deleted]

I got played just like that by Synchrony Financial. I had been in the US for less than a month and was a recent college grad with little knowledge. Didn’t think to do further reading on the terms of the account. I setup my autopay at a specific amount but for some reason the automatic payment decreased by an extra dollar every month. I noticed a week too late and they had charged me over $300 in interest. Never again.


Mr_Kools

This was a synchrony financial deal... They asked if I wanted auto debit, I said yes - the amount was set for me and it all sounded kosher! It was very easy and most people I'm sure just set it and forget it. Glad this subreddit keeps me on my toes.


flmhdpsycho

That does suck. I've always seen the advice that if you do use any of these offers you should pay it off at least 1-2 months in advance to avoid any issues


pheregas

We used this type of deal with a kitchen remodel. Housing rates were rising and we knew we’d appraise even more with an updated kitchen. So we went with Home Depot, got the no interest 18 months, then refinanced less than a year later with the new kitchen, then used the equity to pay off the kitchen. Since rates were lower, not only did we have more equity, but we had similar payments but cut down the length of the mortgage to a 20 year. Wins all around.


Entheosparks

Jordan's furniture does this because they want you to have your new sofa, but don't want to be your bank and chase you down for payment. The contract is only a page long and pretty explicit. If you want financing go to a bank or get a credit card.


ladyangua

Another one to watch for is when there is an excessive delay between when a bill is sent and when it is due. My Mum got caught by that one, not for a huge amount but these sharks will scrape in every dollar they can. She had bought a car on finance through the car yard, made her final payment then a month later she got another bill. In the time between the bill for the 'final amount' being sent and the day it was due, interest had been accumulating; she paid again, this time straight away. Nope, she got another bill, for the time between her bill being printed out, mailed, delivered and accounts receiving her payment. She went into their storefront, absolutely furious, and demanded they give her her balance then and there so she could pay it out. This was a long time back with paper bills and, in Australia, a lot of bills can be paid at the Post Office but that obviously causes a delay between payment and receipt.


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Ki11erPancakes

Bingo, same as Care Credit for health/dental/vet visits. I've got a $800 amount to pay off in 2 weeks else the 0% suddenly becomes something ungodly, like 29.99% or something and all that interest restroactively kicks in. Thankfully we'll be able to pay it but it can be a dangerous thing to forget...


BeanBuddy

A good sounding deal always has the devil in the details... 50% interest is crazy!


Fruitjustlistens

Exact thing happened to me except I caught it literally 2 days before it jumped. Only difference was mine was 100% interest. I had no credit at all back then and was like I can start building like this. Bought a bedroom and living room set. Got a letter from them a week before the deadline that I ended up reading later that night while sitting at the kitchen table because I forgot my phone out in the truck. Went the next day to pay it all off. They tried to tell me the computer system was down and I couldn't. Came back the next day to the same response. I may have gotten a little out of hand with the yelling and cursing because a manager came out. He told me the same thing, ended up calling corporate and they took my info over the phone, gave cash to the store and got a receipt. Will never do that again.


kayemdubs

Got screwed by one of these myself back in the day. Expensive lesson but won’t forget in the future. Good on you!


Username_Number_bot

Medical providers do this as well thru care credit. Beware!


wyonugget

The interest rate is closer to 100%, as rates are typically advertised at the annual rate.


ceman_yeumis

Similar story, different situation. Financed a sectional for around $1200, 0%. They gave me $1500 credit but made no mention of the credit card I was getting.


graham0025

The real interest-rate is the markup on that furniture. They can get by charging 0% interest just fine


Electricengineer

Always pay it off by month 5 and don't risk month 6. My words to live by


TheWiseOne1234

I got caught like that at home depot on two A/C heat pumps for my house. The fee for 6 month no interest was $3,000 for a purchase price of $11,000. Not quite so bad as your couch in percentage but still a lot of money. I missed the deadline by a week. The cost of not paying attention. Lesson well learned, trust me.


momo88852

Same with lots of other credit cards. My friend bought few phones, iPads and other stuff. I believe his total bill was something like $3500, he was offered 12 months no interest. So I warned him and told him to pay it in 11 months or less. But no he ignored me. He was paying $100 and some change a month(sometimes double it). I believe he had $1000 left on his statement. 12 months are up and he gets charged $1500 from $1000 to $2500.


classycatman

I fell victim to this a number of year ago. Like $25 short on the last payment (also automatic) and got nailed for over $1,500 in interest. I was displeased and it was a lesson learned.


urbncoffe23

I used to sell furniture and if the total was not paid off within the interest free period, the total amount they owed would be DOUBLE the cost of the furniture. So it came out to almost 100% interest.


Fiyero109

This is literally every 0% offer out there...you thought they just wanted to move inventory and are offering it out of the bottom of their heart? Nah, the risk is too high, so they compensate with charging interest if you don’t pay on time


Legonator

Jewelry stores do the same thing. Bought a ring years ago from Kay’s. Thankfully the nice employees warned me about it.


okurosetta

It's too bad the salesperson didn't highlight this upfront - I worked in mattress/furniture sales for a few years and always recommended splitting the total by the number of months, or even better subtracting one month first to give a month buffer. With sales it was sometimes hard to establish trust, but when I laid out the reasoning why customers were very appreciative and it helped build that trust.


roranicusrex

If this just happened, you can probably call and get it removed. It has happened to me twice and I was able to get the interest removed and pay the final balance. Now I take the total amount and divide by the #of months -1 to determine my payment.


bankerbouncerboy

Wow! You just saved me $1,800 on a ring we did the exact same thing with (Why pay now if you can oay later for free). Just checked statements, the accrued interest is over 1,800. I’ll be paying it off first thing tomorrow. Thanks


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metroids224

It's fine to finance a car, but a couch? Some people need to get their priorities figured out.


twotall88

I use 'same as cash' financing and knew from the first time I used that type of financing that if you don't pay it off by the end of the promotion period, you owe all the deffered interest because I read the contract. There was only one time it hosed me and that was with Jared Jewelers and my wife's engagement ring/wedding band. I think I misunderstood the terms because they charged me interest the whole time. All-in-all the interest was not enough of an issue to fight it and it helped to build my wife's credit score from 650


bicyclemom

Yup, balloon payments like this should be made illegal. They prey on people who do not read fine print. We had a whole economic collapse based on this kind of behavior back in 2008.


Cr3X1eUZ

That was mostly people who allowed themselves to be convinced that the price of houses could never go down (a.k.a. most of the country)


zoenphlux

It was also due to banks over qualifying people. We bought our house in 2009. If I had bought a house they claimed I could afford, we would have probably lost it in the coming years. Banks validate what you can pay based on some very loose numbers. It’s the same problem as with this 0% stuff. People rely on the financial institution to know best, and they mislead people. Still happens.


UltravioletClearance

So I've never done these 0% interest things before (and never will... I don't even finance my smartphones). Can someone ELI5 what the scam is here? Is it that they set you up with a "default" monthly payment that's intentionally not enough to pay off the debt within the payment period?


omgwtfbbq_powerade

Yes.


sweadle

It's not a scam. It's just a very clear offer that no one reads the fine print of. I've done them a few times when I am on a very tight budget and can't pay down a credit card. So I get a 0% APR on a credit card transfer balance for 12 months. After 12 months all the interest from the previous 12 months is applied. So I pay it off in 11 months with zero interest. Easy. You can't just put automatic payments for the lowest amount and trust that the credit card company will make sure you don't pay interest. They're a business. They're betting their profit that people who plan to pay something off in 11 months won't actually do it. But none of the places who do this hide the terms of interest or make it difficult to pay off. I've even called to check what date my interest would kick in, and they've told me exactly what I need to do pay it off before the promo period is over. It's not a scam, any more than any credit card is a scam. People just use it carelessly and don't read what they sign.


dittmer_chris

You should check out Affirm if the store offers it - no interest scams, 0% APR with them is true 0% APR and they have autopay setup built into their flow before you confirm the loan.