Wednesday, January 29, 2014

90 Days Is Not the Same as Cash

You see the ads in the newspaper circulars that come to your mailbox and on the television, especially around Christmas, 90 Days Same As Cash! Electronic stores, furniture stores, and jewelry stores are fond of offering this “benefit” as part of the Big Sale! No payments until (fill in the date) is a common variation on this theme. Lies! Don’t bite the hook. These people know what they are doing. They are not giving away free money.

You believe that you will pay off that loan with in 90 days, effectively avoiding any interest charges on an installment loan, but that is not what usually happens. People who are that desperate to find a psychological excuse to avoid paying cash at the time of purchase are likely not to up with the necessary funds in the allotted 90 days. In fact the stores expect to collect full interest on around 80% of these “interest free” loans.

Why should credit card companies and banks have all the fun? When these “interest free” loans convert to a regular installment loan after 90 days, the interest rates are frequently usurious. Interest rates from 20% to 38% are typical. Oh by the way, these rates do not just kick in on the unpaid balance. They are back charged on the entire amount! Wait, it gets worse! Depending on the contract, the full amount of interest can be back charged if you miss a payment or are even late on just one payment.

If you are really certain that you can pay off that new television in 90 days, just wait for 90 days and pay cash. You can live without a new TV for 90 days, really. The same can be said for engagement rings or sofas. If your washing machine goes belly up consider the Laundromat for 90 days or perhaps a used appliance. Thankfully, I have never needed to buy used appliances, but I have certainly owned some rusty old used cars back in the day. Dealerships offer no payments until (fill in the date) deals on cars.

Life happens. If you don’t have the cash today, you might not have the cash in 90 days or even 180 days. Perhaps the transmission in your car will choose that very moment to give up the ghost. If you really want to beat the system; pay cash. While having cash in hand is not likely to get you a better deal at a big box electronic store, cash in hand can certainly allow you to negotiate a better deal at a privately owned furniture store.

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