The Perils of No Interest No Payment Financing

You’ve seen the deals, but do you really understand the fine print? Maybe not. According to the founder of Consolidated Credit Counseling, a lot of us don’t.
“Retailers understand the nature of the American consumer,” Dvorkin said. “Though people may have great intentions of paying off the balance in full when the promotional period is over, a large majority don’t. It’s just as simple as that.”

The consequences are scary if you’re not the sort of person who pays on-time. “Let’s say you owe just $150 on a $2,000 sofa you financed with a zero-percent offer. Missing the final payment will cost you an extra $480 at 24 percent interest. On top of that, you’ll probably get socked with a late fee of $35 or so.”

Yikes! Pay those off on time! —MEGHANN MARCO

Consumer Lookout: No interest? No payments? No sympathy for the unwary [Minneapolis Star-Tribune]


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  1. jeblis says:

    Yeah I’ve got one of these deals on my TV. 2 years no payments no interest. At 24% percent compounding interest you can bet this will be paid off well before the end.

  2. thrillhouse says:

    Yikes! Pay those off on time!

    Yikes! Pay for it in cash. If you can’t do that then maybe its a sign that you can’ afford it.

    Yes, they will nail your ears to the wall on this one. Yes, they know that this happens often enough to make and absolute killing on interest and fees. Why do you think they offer it? Why do you think every retail store on earth now offers credit? Victoria’s Secret makes more money off the sale of credit that the sale of underware. Sears too.

    Once again, if you can’t pay for it in cash, then you probably can’t afford it.

  3. Sudonum says:

    I’ve said it before, I’ll say it again. Take the interest free offer. Put the monry that you would have spent on the item and put it in you savings account. Draw interest on that money in you savings account, while ever month you pay 1/12th of the amount. At the end of the year, you have earned yourself a few bucks interest and had free use of the stores (or banks) money. Just make sure to pay it off on time!

  4. pestie says:

    Sudonum, that only works if the time you spend managing that process is worth less than the amount of money you’d actually make. If you’re lazy but responsible, paying cash is the way to go.

  5. Sudonum says:

    What management? Do an auto-debit from the savings account

  6. thrillhouse says:

    While the opportunity to make eight dollars over 24 months does sound temping, I would never enter into an agreement with snakes like this. What an increadibly unnecessary way to bring so much risk into your finances.

  7. I have to say, I’m making a lot more than 8 bucks over 24 months with this sort of scheme. I currently float about 15k on a no interest credit card. The cash to cover it is sitting in an HSBC savings account earning me 5%. That’s $750 a year. I know exactly when the interest free period on the card is up, and about a month beforehand I call around to my other credit cards (which aren’t carrying a balance, by the way) to see about 6-12 more months of 0% interest. I’ve been successfully doing this for about a year and a half now.

    It feels really nice to know that I’m successfully milking the credit card companies, instead of the other way around.

  8. Sudonum says:

    I too did a little better than $8 in earned interest using zero interest credit. I had to replace everything after Katrina (and I am not a “Victum”, Ins paid for nearly everything). Try putting $20k of new furniture on an interest free credit account and then receive 4% in return. Do it again with $5k worth of appliances. Do it again with new $10k of new cabinets… should I go on? You get the picture. And even if it was only $8 thats still $8 I didn’t have before without a whole lot of effort on my end. Hell, with 2 more bucks I can go charge some ice cream at Amy’s without having to stretch out the payments

  9. thrillhouse says:

    Amazing! And yet you still can’t see the stupid risk you’ve taken on here. Guess thats tough to figure into the equation… best of luck, you’re going to need it.

  10. billhelm says:

    In addition to putting the money in a savings account, you can also take the opportunity to pay off additional amounts on your mortgage (or other loans, though if you have other types of higher interest loans, you probably should pay those off instead of buying new stuff), which will save you interest above and beyond what you’d “earn” on it in a savings account.

    I tend to take whatever the item is purchased for, divide by the number of months with 0% and make a payment equivalent to that every month till it is paid off.

    Useful technique to make your money work for you in other ways – but it only works if you have the money to begin with and pay everything on time.

  11. Sudonum says:

    What stupid risk? The accounts are all paid off with zero interest paid and I earned a few bucks from the credit card companies. I have ZERO debt right now except for a mortagage.
    I’m sorry that I can’t buy into your “credit is evil” line of thought. Credit, like much in life, is what you make it. If you can’t control your spending impulses then yes, you should not own a credit card. But failing to see the benefits of sometime using Other Peoples Money is also risky. What is the single largest asset most people own? Their home. Did all these people pay cash for it? Not very likely. Do these people have equitity in their homes that they got not just from paying down the note, but from appreciation. Would they have that increased equity if they hadn’t borrowed money to buy the home in the first place? Not bloody likely.
    People who get wealthy get there by making their money work for them instead of them working for their money.