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Message
0% interest question
Posted on 2/19/13 at 8:18 am
Posted on 2/19/13 at 8:18 am
I've let the wife talk me into some purchases and I hate having monthly payments hanging over me. We are very liquid, but when we buy larger items or do home improvement projects, we always finance using 0% interest--I'm looking at about $10,000 in debt, all at 0% interest.
All accounts are setup to auto draft monthly and all are setup to be paid off before the promotional period ends. Am I just paranoid about having debt or should I just pay the crap off and not worry about it?
On one hand, 0% is nice, but on the other, monthly expenses add up and me uncomfortable!
All accounts are setup to auto draft monthly and all are setup to be paid off before the promotional period ends. Am I just paranoid about having debt or should I just pay the crap off and not worry about it?
On one hand, 0% is nice, but on the other, monthly expenses add up and me uncomfortable!
4
Posted on 2/19/13 at 8:21 am to JoseVargasTX
quote:
On one hand, 0% is nice, but on the other, monthly expenses add up and me uncomfortable!
It comes down to what will bring you peace of mind. For me, I don't like having a bill waiting for me at the end of the month, so I pay for it at the time of purchase and am done with it.
Others will tell you to use the bank / credit card company's money while you keep yours socked away in an online account. From a financial standpoint, this makes more sense.
But from a risk standpoint, if you somehow are late or miss one payment, be prepared to pay all interest charges retroactive back to day one.
The risk to reward ratio just isn't there for me.
Also, home improvement, furniture and even some retail credit cards are often "frowned" upon by credit bureaus, which can lower your credit score.
This post was edited on 2/19/13 at 8:23 am
Posted on 2/19/13 at 8:42 am to JoseVargasTX
84% of the 0% interest loans are not paid off in the 90 day, 6 month, or 12 month time periods. That's almost all of them. So yes it is a risk. Also consider that money is never loaned for no profit. The 16% of people who pay the loans off in the time period have overpaid because the profit was built in to the cost of the product. You can always get a better deal with cash.
Posted on 2/19/13 at 8:47 am to Vols&Shaft83
quote:
The 16% of people who pay the loans off in the time period have overpaid because the profit was built in to the cost of the product.
This isn't at all true.
Posted on 2/19/13 at 8:53 am to Vols&Shaft83
quote:
Also consider that money is never loaned for no profit. The 16% of people who pay the loans off in the time period have overpaid because the profit was built in to the cost of the product. You can always get a better deal with cash.
Posted on 2/19/13 at 8:54 am to PurpleAndGold86
quote:
This isn't at all true.
I can speak from experience that when I go to buy furniture, especially at a local store, I can get a better deal by paying cash than paying with a credit card.
Posted on 2/19/13 at 8:54 am to JoseVargasTX
I hate debt as well but used the 0% to buy a Kubota tractor two years ago. With the auto draft I don't notice it and that actually makes a big difference to me. I'll probably end up paying off early but I've reasoned in my mind this was fine to do instead of pulling 17,000 out of savings.
Posted on 2/19/13 at 8:56 am to Will Cover
quote:
I can speak from experience that when I go to buy furniture, especially at a local store, I can get a better deal by paying cash than paying with a credit card.
Furniture, absolutely.
However, it depends on the product you are buying. I recently had 4 new tires put on my car at Firestone. They do 6 months interest free on purchases over $299. There was no markup on my tires and I got a 10% discount for opening a line of credit with them.
Posted on 2/19/13 at 9:21 am to PurpleAndGold86
quote:
Furniture, absolutely.
However, it depends on the product you are buying.
Agreed. I've just never been one to open any account for the sake of saving __ % off my initial purchase or interest free for 180 days. In my opinion, it is too much hassle than what it is worth, plus I increase my chances of having fraud (identity theft) committed against me.
Posted on 2/19/13 at 10:52 am to Will Cover
It depends on what else you will be doing with that $10k in the meantime. If it's earning you money (and not just some bullshite 0.1% savings account), or makes up a substantial part of your emergency fund or something, then just pay monthly. But if not, I would probably just pay it off, mainly b/c of this:
quote:I did a 12 month promotional interest free purchase one time for about $5k. I made all payments timely and it worked out, but I was sweating bullets worrying about if my payment got lost in the mail each month or something. At the time, paying it all off wasn't an option, so I had to do it. But it's too nerve-wracking for me to do again if I can avoid it.
if you somehow are late or miss one payment, be prepared to pay all interest charges retroactive back to day one.
Posted on 2/19/13 at 11:14 am to Vols&Shaft83
quote:
84% of the 0% interest loans are not paid off in the 90 day, 6 month, or 12 month time periods. That's almost all of them. So yes it is a risk.
It is the same as reward points on credit cards, users see this as free money, but the credit card issuer knows the majority are not going to pay off the card in full.
Posted on 2/19/13 at 11:28 am to JoseVargasTX
I can get points and $200/yr in interest on my cash with 0% promotion, so I'd do it.
But it does depend on situation, sometimes cash is better if discount is greater than interest that can be earned.
I can be a little OCD about it, but protection my $ is a hobby of mine
But it does depend on situation, sometimes cash is better if discount is greater than interest that can be earned.
I can be a little OCD about it, but protection my $ is a hobby of mine
This post was edited on 2/19/13 at 11:29 am
Posted on 2/19/13 at 11:36 am to Vols&Shaft83
quote:
The 16% of people who pay the loans off in the time period have overpaid because the profit was built in to the cost of the product. You can always get a better deal with cash.
You can get an even better deal by paying with someone else's credit card that is charging 0%. You aren't restricted to using a given store's card you know.
Posted on 2/19/13 at 1:59 pm to Vols&Shaft83
quote:
84% of the 0% interest loans are not paid off in the 90 day, 6 month, or 12 month time periods. That's almost all of them. So yes it is a risk. Also consider that money is never loaned for no profit. The 16% of people who pay the loans off in the time period have overpaid because the profit was built in to the cost of the product. You can always get a better deal with cash.
I've been told this about my car purchase. But the way I see it, it's just not true. Whether it's Toyota financing it, or your bank, the dealership always receives the cash right away. So you really aren't buying negotiating room.
I'm not sure if other dealerships finance it themselves.
Posted on 2/19/13 at 2:17 pm to PurpleAndGold86
quote:
This isn't at all true.
Really? Not at all?
Explain to me how 0% interest makes money for the 3rd party lender then? Banks NEVER LOAN Money at 0% interest. They will either charge the facilitator of the loan, or the customer.
Or do you think all of those Wells Fargo skyscrapers just appeared out of thin fricking air?
Since the customer agreed to purchase the item, at 0% interest for 90 days, then the seller of the item is responsible for the interest to the bank. The seller is going to let the bank take his profits? I THINK NOT.
Posted on 2/19/13 at 2:17 pm to NukemVol
Thanks for all of the input guys--my money is in a checking account earning slightly over 1%, so I'll keep it there--I know, crazy rate for checking account--when I opened it, I was earning 4.4% on my checking account balance!!!!
Posted on 2/19/13 at 2:21 pm to NukemVol
quote:
I've been told this about my car purchase. But the way I see it, it's just not true. Whether it's Toyota financing it, or your bank, the dealership always receives the cash right away. So you really aren't buying negotiating room.
I have yet to see a Toyota advertisement for 90 day, same as cash financing. And yes, the dealership receives the money from the car purchase away, you are correct.
Posted on 2/19/13 at 2:30 pm to Vols&Shaft83
quote:
Explain to me how 0% interest makes money for the 3rd party lender then? Banks NEVER LOAN Money at 0% interest. They will either charge the facilitator of the loan, or the customer.
Because the 84% who don't pay it off in time provide more than enough profit to cover the 16% that do.
Why do retailers run ANY promotion in that case?
Posted on 2/19/13 at 2:36 pm to slackster
quote:
Because the 84% who don't pay it off in time provide more than enough profit to cover the 16% that do.
Why do retailers run ANY promotion in that case?
Right
And even for the 16% that do pay it off in time they can use that promotion as a loss leader to get you to buy other shite while you're there.
Posted on 2/19/13 at 2:41 pm to Vols&Shaft83
quote:
The 16% of people who pay the loans off in the time period have overpaid because the profit was built in to the cost of the product.
This, cash is king when it comes to household purchases.
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