“18 Months Same as Cash!” … Really?

by Joe Plemon on January 25, 2012

Run...Don't Walk...Away from these offers!

Is zero interest for 18 months REALLY zero interest? If you can walk a tightrope while juggling flaming torches, then maybe. But beware — many of these offers are fraught with conditions that will make your head spin.

Best Buy, for example, is currently offering 18 months zero interest on all purchases over $429. However, the fine print describes the tightrope:

  • If you are late for a single payment, interest will be charged from the purchase date.
  • If you do not pay the full amount within 18 months, interest will be charged from the purchase date.
  • The annual percentage rate (APR) for your credit card is variable and based on your creditworthiness.
  • The Reward Zone Program Card has a standard APR of 24.24% – 27.99%; the penalty APR is 29.24% – 29.99%.

Vendors expect you to fail.

According to Dave Ramsey’s Financial Peace University, 88% of buyers who purchase with zero percent interest payments will not keep their end of the agreement. Vendors who lure you with “same as cash" offers are keenly aware of this statistic; they are literally banking on these failures. According to the fine print, if you are one hour late on your very last payment for your $500, 18 month contract, you will pay over 29% APR for the entire term – at least a $126 finance charge. Of course, additional fees and penalties could and likely will apply.

Why cash is king.

Instead of shopping for the best financing offer, why not save up your cash and shop for the best price? The very act of saving money will help you develop the character traits of patience, delayed gratification and solid money management. Once you have that cash, you will have:

  • Negotiating power. With those five Ben Franklins in hand, you will be able to make some deals. Sellers listen to the rustle of money.
  • Time to shop. You have learned patience by saving up for your purchase. Use that patience to do plenty of looking before buying. By taking your time, you will find a great deal.
  • Time to change your mind. It is very possible that by the time you save the money for your purchase, you will no longer be so hyped up about buying it. If you go ahead with the purchase, do so with no regrets. However, because you are keenly aware of what was required to save that money, you may opt not to buy. Either way, the time factor works to your favor.
  • Zero risk. No one who is deeply in debt started out with a plan to get there, but they nevertheless arrived. When you buy on time, even with no interest, you are always inviting the unexpected to happen. Those who save and buy with cash never, ever end up in debt.

Is 18 months same as cash? Hypothetically, it could be. Practically, it seldom is. It certainly isn’t worth the risk.

The prudent shopper will take his time, save his money and make a wise purchase. I hope that is you.

Readers: what experiences (good or bad) have you had with “same as cash” purchases?

{ 5 comments… read them below or add one }

Money Beagle January 25, 2012 at 8:19 am

We bought a considerable amount of furniture when we got our house in 2007. At the time, they were offering 12-months, no interest, no payments, which means you didn’t even have to make payments at all the entire time, but the same thing applied, that if you didn’t pay it off in full by the end of the 12 months, you were charged all the interest.

We took advantage of that especially since we had the cash, and back then, interest rates on savings accounts were still pretty good. To be safe, I started making the payments at month 10. That way, when month 11’s statement came, it verified that things were paid in full and everything was clear, and gave me enough time to fix any problems that might have arisen before month 12.

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Joe Plemon January 25, 2012 at 1:34 pm

Beagle–Obviously, you are good at walking a tightrope while juggling flaming torches. Congratulations! 🙂

Just wondering…being as you already had the cash, did you try negotiating for a better price? If you could have done so, you probably would have saved more than your savings account was paying.

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Joe Plemon January 25, 2012 at 1:38 pm

Sweet. I love it when people turn these special offers on their head and actually take advantage of them. Home Depot wouldn’t have been giving $100 off with a credit card sign up unless they expected customers to get behind on their credit card payments. You couldn’t have done this deal, of course, if you hadn’t already saved up for the grill.

Hope your Dad loves the grill!

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krantcents January 25, 2012 at 7:36 pm

This offer reminds me of a acronym TINSTAAFL. It means there is no such thing as a free lunch. No one gives you anything for nothing.

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Mikhail January 27, 2012 at 12:06 am

I agree with you point, using credit cards for huge expenses is not really that practical. I would prefer to buy using cash since the time it takes me to save can be used to ponder if I really need the item or not. Another thing is that a better item might come out in the market during the saving time.

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