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

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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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