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Stay Away From The “90 Days, Same As Cash” Trap

By Erik Folgate

So you go out one weekend to look at furniture. That couch with the funky smell and the 1970′s style dining room table just aren’t cutting it anymore. You don’t really have the money to spend on new furniture, but you deserve it, right? You walk into the furniture store to the smell of fresh popcorn and oven-baked cookies, two of the most alluring smells on earth. You go and get yourself a snack and you start browing around the store with no real intent on buying anything today.

The saleswoman approaches you and introduces herself with a warm smile. She’s not too pushy about selling you anything, but she’s there to answer any of your questions. Then, without any warning, you spot the leather couch of your dreams. A beam of light is shining right down on it. It’s dark, plush leather and the perfect size for your place. You walk over to it and the experience sitting down on the couch is even better than the experience of looking at it. And what a coincidence that this leather couch comes with friends. You can buy the entire set which includes the full couch, loveseat, chair, and tables for only $2499! You think to yourself, “What a bargain, but I don’t have $2,500 right now.”

Somehow, the saleswoman heard you say this to yourself and she chimes in with the magic phrase, “Well, we are running a special right now where you can purchase this set and get 90 days, same as cash financing. Your ears perk up and you start doing the math in your head. “Well, I’ve got $500 now, and I could probably scrounge up $700 bucks a month for the next few months. Sold!”

This may have been an overdramatized version of what really happens to someone when he or she goes shopping for big ticket items such as furniture, but I bet you can think of a time when you weren’t serious about buying something, but the special financing offer lured you into making an impulse buy when you didn’t have the money. The appeal of the “90 Days, Same As Cash” gimmick is that it makes you feel like you are beating the system by getting a free loan for 90 days. Many stores will also give you 6 to 12 months of interest free financing if you sign up for their credit card. Best Buy and Home Depot are notorious for this gimmick.

So, you are so smart if you cheat the system by going for one of these specials, right? WRONG! The fact is that almost 80% of people that go for these deals NEVER pay off the balance in full by that 90, 180, or even 360 days. Companies know this, and that is why they offer it! They get you to make the purchase, and then they start making money off the financing once you don’t pony up the money right away. And it’s not that you are a totally irresponsible person. Life took control of the situation. Maybe you car had to be repaired or your kid needed new glasses. Life’s little emergencies pop up and hinder us from paying off things that we planned on paying off. Sure, you might be part of that 20% of people that have paid off the balance in full and “beat the system”, but did you really? It’s much harder to negotiate a deal when you are financing something like appliances or furniture. If you had walked into the furniture store with $2200 in cash, you may have been able to walk away with that set for a 10% discount, but instead you are sweating it out for 90 days hoping that you can get it paid off.

Another reason why the interest free gimmicks are a bad deal is because many programs will back date the interest during the interest free period and charge it to you in a lump sum once the interest free period has passed. Also, that 0% interest will most likely turn into an obscene rate like 24, 32, or even 38% interest! These deals will also go sour if you are late on a payment. Many programs will void the special if you are even one day late. Do I need to give you anymore reasons why these deals only benefit the company in the end? The easiest thing to do when buying a refrigerator, couch, or patio furniture is to just pay cash! It’s as simple as that.

Erik Folgate
Erik and his wife, Lindzee, live in Orlando, Florida with a baby boy on the way. Erik works as an account manager for a marketing company, and considers counseling friends, family and the readers of Money Crashers his personal ministry to others. Erik became passionate about personal finance and helping others make wise financial decisions after racking up over $20k in credit card and student loan debt within the first two years of college.

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  • http://www.artificialrobot.com Sean

    “80% of people that go for these deals NEVER pay off the balance in full”

    Wow, that is way higher than I thought it would be. I’ve actually done the 12 months no interest game once before for some furniture. It worked out for me, but I was never comfortable with it. I always worried I was going to miss a payment accidentally and get hit with all the back interest AND the high rate. I agree with the author though, save the money first and then buy.

  • Jenny

    We use same as cash all the time just so we can keep the money in our pockets in case of emergency in between the time we start the clock and the time the due date happens. We never have missed a due date. The beauty of it is that you don’t have to make a payment most the time, until it’s time to pay it off so you can set aside some money each month if you don’t already have it stashed away. The interest can only be charged on the outstanding balance on the due date and most programs have no penalty for prepayments so you can pay it off as you can. I’ve seen interest rates at 15% 16% 17% and never saw any with 25%+. It’s a great program for really needed items like replacements to heat/AC, or applicances you HAVE to have now, but didn’t plan on

  • Mike

    “80% of people that go for these deals NEVER pay off the balance in full” This is simply not correct, and was obviously NOT researched. The author should go and check with finance companies to really find out how many customers don’t pay off in the SAC timeframe. I used to sell windows and our customers used 6 or 12 months SAC programs about 25% of the time. This amounted to roughly 500 customers a year. Our finance provider said that virtually ZERO customers allowed the free timeframe to expire.

    Watch the clock, make sure you are on top of your bills and pay it off on time and use someone else’s money – why not!? Many stores give a cash discount, but some don’t and the SAC deals are truly FREE if you pay on time. The finance companies do NOT make their money on interest from the customer but on fees the store has to pay. They usually range from a couple of percent for 90 days up to 10% – 11% for 18 months.

    It WILL show as an inquiry on your credit report which MAY be a problem for some folks.

  • http://madsaver.com Mac

    For big ticket items, I almost always go for the 6-18 month no-interest deals when I can find them…assuming I already have a store card. It’s not always easy to pay it off in time, but I make that a #1 priority and have succesfully done so each time. I find I still can haggle, even with the finance plan in place, so it’s been a win-win for me.

  • ryan

    you are just a bum. its called budgeting, look into it.

    • http://madsaver.com Mac

      Hey, not very appropriate. So your method (if you have one), is different than my own. Big deal. The way I do it works for me, and I certainly do budget…that’s how I’m able to pay off every purchase I make and never pay a dime of interest. Do you have a house, a car? Do you pay for those up front, or do you have a loan? Same deal, different product.

  • Smart

    If you are able to pay it off within the time period, there is nothing better, IMHO. I ONLY use “xxx same as cash” offers. Granted, I have the cash to make the purchase outright at the time I make the purchase, usually, but I would much rather keep the money to myself and let someone else pay for it. As a previous poster noted, budget. I simply figure out how much I need to pay monthly to ensure that I don’t get slammed with the finance charges. It’s really easy and nice.

    The bigger underlying problem was touched upon in the first paragraph. People feel entitled to buy stuff (I deserve it, right) even when they cannot pay for it. Part of the cause for the whole subprime/housing debacle. Sure, the lendors were greedy, but the fact is, many people bought more than they could pay for…

  • Roger

    WOW! you’re brilliant! those people wouldn’t ever have shit either if they didn’t purchase it that way! How many people just have cash saved up or around to go buy the things they need right now! Life doesn’t work that way! Hence the reason why we have those finance programs! Especially with the economy the way it is! Sure a lot of people have abused it and have gotten themselves into bad situations. Moderation is the key to most things in life though! This is a world of impulse buying! Always has Always will be! Get over it and just buy things in moderation! Don’t buy 3 big ticket items on financing in a short period of time. Just be a bit smarter about it and you’ll be fine! Just make sure you don’t make late payments and if you’re budgeted well you will have a lot more things in life thanks to these type of finance programs! MODERATION!!

  • Vina

    I think if you live within your means and don’t over purchase what you can’t pay off, the “same as cash” deal can work out for anyone. Budget, budget, budget!!!!!

  • Myecom

    I always use these, and I always pay them off before they are due. I bought a bed for $3200, 24 months no interest and paid it off in 8 months. So if your not an idiot these can work for you.

  • mattyk40

    To those of you who think it is smart to use these “xxx days same as cash” options who have the money to buy today…..you are not utilizing your money well. It usually cost the store offering the program anywhere from 5-15% of the amount being finaced to use this system. How else would the credit company make $$$ from those that pay in time? This means that if you have the cash, it would be easy to negotiate a lower price, since they would have to give it up to the credit financing compay anyway. Use your money wisely…

  • Williahg

    I do this all the time. I have the money to pay cash. Why should I when I can use their money for free. I pay everything off before the alloted time. That is the key.

  • Mark Willson

    The statistics are wrong. Approximately 55% of people who participate in these programs pay the balance in total in the 90 days.

  • Mark Willson

    The statistics are wrong. Approximately 55% of people who participate in these programs pay the balance in total in the 90 days.

  • http://twitter.com/jedison718 jeraine

    Dont buy anything above your means. I dont have the cash to pay for these things right away but I get what I can afford. I dont go for the 2500 dollar purchase I get the 500 dollar purchase and put 300 down on it and pay it off in a month and a half. Its all about what you can afford

  • Hector

    I do not agree, because if you get on one of these deals the 3 payments or however many payments you would have ro make in 90 (3 months) could be seen by the purchaser as any other type of monthly due like your car note, rent, mortgage etc. if you don’t pay any if those payments the ramifications wouldn’t be good at all. So in a way its just about being responsible and adopting the mentality of “I have to make this happen”.

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