No interest? No payments? No sympathy for the unwary

StarTribune.com

Consumer Lookout: No interest? No payments? No sympathy for the unwary

Zero-percent financing deals from holiday shopping sprees could end up costing you plenty if you aren't careful.

Jackie Crosby
Last update: January 07, 2007 – 8:37 AM

When does a retailer's seductive moment become a consumer's financial trap? Credit counselors say the "no-interest, no-payment" offers that entice holiday shoppers each year could serve as Exhibit A.

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Unfortunately, most of us don't read the fine print or fully grasp the details of the contract. We just know we can take home that $999 plasma TV and have 12 months to figure out how to pay for it. We hardly consider the high interest charges we'll get socked with if we don't pony up on time... Zero-percent financing promotions can be a boon for disciplined consumers who pay off the balance before the clock strikes on the deadline. These shoppers take advantage of someone else's interest-free money for a year, and let their own money grow in the meantime.

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For those who don't pay on time, that no-interest claim turns into a high-interest ticking time bomb. Interest rates often range from 24 to 28 percent, nearly 10 times the inflation rate and double to triple the cost of a conventional loan. And even if you've been diligently paying off your balance each month, you'll get charged interest on the entire purchase amount, not just on what you owe.

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.

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And by all means, get out the paperwork, and read the fine print.

http://www.startribune.com/535/story/918239.html

and most people don't understand what the word "defer" even means

but then again, gotcha capitalism is nothing new.

the idea is to set up a lot of rules, possibly very silly rules, some of them serving no purpose other than to trip you up. then, if you break a rule, they turn you down, charge you extra, jack up your rates, whatever. the key is to play on the guilt of the consumer who feels they are in a tough negotiating position because they violated one of these stupid "rules". GOTCHA!

this is why credit card companies charge $35 for a payment that's one day late or one dollar short, and then turn your 2.99% balance transfer rate into a 29.99% default rate. GOTCHA!

municipalities like boston and san francisco have been practicing their own variant for years. parking on this side between these hours is fine except on weekends and every other thurday except holidays and emergencies or when the moon is waxing while mercury is retrograde. slip up and your car is towed at your expense and you have to pay a ridiculously large fine as well. it's not set up to keep the streets clear (though that is always the nominal motivation) it's really to make it confusing enough so that enough people will slip up and break the rules, so that they can raise revenue from the "guilty" and hopefully avoid having to raise taxes on the rest of the voters. GOTCHA!

Even though I had the $$, I used the free interest, no payment option to buynew flooring for my home, my computer, my TV, my digital camera, a new hide-a-bed etc. Why take my $$ out of an interest bearing account when I can use someone elses? I'm always very careful to send the finalpayment about a week BEFORE it's due, and if it's not payable online where I would have proof of when the payment was made, I send it proof of receipt. I've never had any problems at all!

It is true, BUYER BEWARE is a very good statement to remember, because retailers are betting that you'll overbuy and not be able to make that payment when it's due. THEN they bill you for all the accumulated interestover that "free interest" time. I say, if you're careful and concientious with money, use THEIR money when you can!

Like you,it saved me money. The seller probably relies on the fact that
many people can't pay off a large purchase easily. Had I not paid it off within the one year time period, it would have cost several hundred dollars more.

Too lazy to read/understand the fine print; greedy enough pursue a freebie without considering the potential costs; and stupid enough to think they're getting one over on financial experts.


And one last little nasty I've heard of, built as a trap for the non-lazy/greedy/stupid, is an undisclosed fee for closing out the loan account, levied AFTER the final payment is made. You think you've paid everything, until you receive a letter at the beginning of the next month, showing an outstanding balance of 1 cent AND the accrued interest for the entire loan amount.

However, we ALWAYS pay the contract out on time. Why lose the opportunity cost of our money?

One difference with the story, however, is we don't do this with impulse purchases. We only use the "X months as good as cash" option for major home purchases we've considered carefully. For example, we're probably going to do this for the big kitchen renovation we're gearing up for.

Purchased a $1500 item from Home Depot - no interest for six months - and was sending $250 each month.

Each statement clearly indicated that the "expiration date" was 12/27.

In November we purchased a few additional items that were added to the December statement, only the pay stub, in large letters, gave a January 1st payment due.

The 12/27 was still there, in small print.

I sent the payment well in advance of the 12/27. I have no doubt that had I relied on the "Payment Due Date" of 1/1, we would have been saddled with the accrued finance charge of $95 plus late fee.

This is really a misleading, conniving scheming way to defraud even the consumers who do try to be responsible.

The people who come up with these schemes and the ones who sell them in the hope that people won't read or understand the fine print are, well, from a different planet. Do these people go home thinking "I screwed another 10 people today. What a GREAT day?"

people buying things they can't really afford, but for some reason, they always the $$ will come from somewhere by the due date! It's not a whole lot different than credit cards. Everybody KNOWS the ideal thing is to pay off the balance every month, but so few do. Also in their mind, they know they have $xx,xxx.xx amount of credit left on their card, and they can always make that monthly payment!

Unfortunately, Americans are a consumer society, and most are also a "I want it NOW" person too. When was the last time you've heard someone say, "I'm saving up for xxxxx?

I can't blame the lenders for this.

.. the predators who come up with these schemes, the buyers are the ones at fault. If you don't have CASH for a TV, do without a TV until you do. Borrowing money for anything other than a house or MAYBE a car is dubious financial management at best. The rates at which Americans do it is downright reckless.

That's the way the lenders plan to make money. They ARE preying on the people who live with the "I want it now" mentality, true. In some cases they are also using clever devices like the one cited by the poster upthread (having two difference "due" dates on the same statement.)

It's not much different than a confidence game, except that there is a possibility that the consumer can game the game with these albeit legal schemes. That's why I said I don't understand the mentality -- it's like sticking your foot out to trip someone and then blaming the victim for not looking down in time.

and buyers beware.

While one may almost understand banks, who are in the lending business, doing this, it is outrageous when retailers, who are expected to make money from sales of merchandise, do.

But, this is capitalism for you.

Capitalism and the free market are just means to exercise it. Neither require such behavior.

Me, if I can't pay for something in full upfront, I just do without it. That's how I was brought up, and it still seems like the best way.

I could take good advantage of these sorts of offers, but that would be like endorsing trickery against those who are naive and/or weak. And I don't want to do that.

There is nothing wrong in taking a loan for major items, as long as both sides realize the guidelines with no "small print."

home depot offers this option, do you seriously think all of the people whose houses were destroyed by katrina and other storms should just wait until the road home program FINALLY gives more than 100 people the money?

because you do know that's how many people in louisiana have received their "road home" grants, don't you -- about a hundred out of maybe 100,000?

people can't just put off putting a new roof on until some day, pie in the sky when they die, they have saved up some huge sum of money

they have to take the "no interest" deal and hope the insurer or the gov't coughs up the $$$ in time

when your house gets blown away, come back and tell me how you bought another one upfront

if we were just talking teevees, i'd agree with you

we're not

we're talking home depot, we're talking restoring people's homes

Our economy is about 3/4 service based. If we don't go and purchase "stuff" we are hurting our economy. Many who work at these stores, making minimum wage (of course) will lose their jobs if we don't go shopping.

Remember Bush's $300 "gift" in August 2001? "Go shopping," he said. Thankfully, most people paid existing debt or put it to saving.

Only recently, I don't remember the occasion, he, again, asked us to go shopping.

:sarcasm:

Here's why: We purchased a sofa several years ago using this method. Within a few weeks, the stuffing in the back cushions started to sink downward. No matter what I tried, I could not get it to fluff up again. It was obviously flawed. I called the furniture store. My problem, they said...don't let the kids jump on the back of the sofa. I had only a 3 month old child.

So, I called the finance company and told them to come get the couch. I explained the problem, and told them I was not about to pay that kind of money for a defective product.

The furniture store called me the next day, and asked what would be a convenient time to pick it up. They returned it a few days later in perfect condition. It lasted many years.

So, besides saving money, it gave me some leverage in this situation.

Even those who intend to pay it off on time are often screwed with interest because the loan processing centers have a policy of applying the payment 1 day late. If you pay it off a full 2 months in advance your next to last statement will show a zero balance and if it doesn't you still have at least 3 weeks to raise a fuss.

some people might say 2 months lead time is too over cautious but i'd rather err on the side of caution than otherwise

these deals can be very good if used when appropriate, just get a good calendar and mark the reminder date on it, if you already have the money then put it in a CD that expires a bit before when you plan to pay off, the interest will be found money

If you can't afford it, don't buy it. I wish stores would give a discount to people who don't finance these things.

years ago. I think it was 6 months, no interest, zero pct, etc. We paid it in full about two months before the end of the six months, and paid no interest of extra charges.

But if you decide to start paying it off after six months WATCH OUT! You will be screwn. 24-30% interest and fees.