When John and I moved into our very first apartment together (and long before we discovered Dave Ramsey together) we decided to "reward" ourselves with a brand new Play Station 3 gaming system. John had been wanting one for so long, and who was I to tell him no? So we went down to the local Best Buy and picked one up. Cha-Ching! $300 put on my retail card, but it was 90 days "same-as-cash" so it wasn't really that bad, right? I had used the "same-as-cash" promo several times before and I ALWAYS paid it off before the deadline so I never paid interest. I felt pretty smart about outsmarting the system. Well, a few days later, after John had a chance to play some of his high-tech games on his new super crisp gaming system, he realized that our outdated 32" tube television was just not cutting it. The awesomeness of his new Play Station needed an equally awesome HD TV to play it on! So hi-ho hi-ho back to best buy we go! This time, they gave us 12 months free financing on a brand new 40" flat screen HD TV with all of the bells and whistles! I again was feeling pretty confident that we had just made a very smart move, using my impeccable credit to earn ourselves a year to pay it off with no interest!!!
Fast forward to almost a year later, and by the grace of God nothing catastrophic struck and we were able to make all of our payments on time and our amazing TV was almost paid off! Wouldn't you know it though, in an innocent trip to the electronics store, it happened. I saw the most amazing TV I had ever seen. The picture was so clear I felt like I could reach out and touch Johnny Depp. I HAD TO HAVE THIS TV! So back to best buy we go, and this time we decide to get the new TV and a matching theater system to go with it! We walk out with a $2200 theater set that was again financed at 0%, but this time for 18 months! Wow, they must really like me a lot to trust me with 18 months of financing. They even gave me a Best Buy Platinum Rewards card so I could shop even more and earn cash back! As we mailed in out $200-300 payments every month over the next few months, the awesomeness of the new TV wore off. The picture was still pretty cool, and all of our friends loved coming over to watch Blu-Ray movies on it and play games, but it hardly seemed worth over $200 a month for that luxury. But not until Dave addressed the true downfalls to 0% financing did I really realize that I had been duped.
First of all, most people do not pay of their item within the grace period. Luckily Murphy didn't strike while we were repaying on it, or else we might have fallen behind and not been able to pay it off. And interest does not start being charged once the grace period is over either. If you do not pay it off within the time period, they tack on the interest for the ENTIRE length of the loan! They just tack on whatever interest you would have paid since the beginning! Second, they are not as likely to negotiate on price if you are financing the item. You are often paying full price for something that could have been bought at a steep discount if you had brought cold hard cash to the table instead. For someone like me, that always needs to get a deal, I was surprised I fell for that. And third, I realized that if John and I had saved up $2200 in cash, and I walked into Best Buy with it in hand, I have no doubt in my mind that I would not have bought the TV. That last one was a real eye opener. Without barely a blink, I forked over more money than my car was worth (I paid $2000 for my car) and bought a freaking TV! But since it was on credit, and I thought I was getting such a great deal at 0%, I didn't hesitate. But once I thought about how much money that really was, and how much I could have done with that $2200 instead of buy a TV, I felt like a complete idiot! Not to mention that once we had paid it off, the thing was practically obsolete and worthless...
I was so unbelievably happy to cancel that credit card and let Best Buy know that they can keep their "Platinum Status". I was done letting them insult my intelligence and treat me like a fool! I can't help however, feeling sorry for all of those people who still think 0% financing is a good deal. If after this, you still feel that way, at least take some time to make sure that you can make the payments every month (it will be more than the minimum if you intend to pay it off before the deadline) without any chance of falling behind, and also be completely certain that if you had that entire amount in your had that you would still make that purchase for that price. I can almost guarantee you that you wouldn't!
I hope my huge mistake helped you not make the same one :)
Sarah
We fell for this too with our mattress. Never again!
ReplyDeleteSarah,
ReplyDeleteThank you so much for sharing your story! We facilitate a FPU class at our church, and in our previous class we had someone who could not wrap their mind around the pitfalls of the 90 days same as cash scam. We finally got through to him, but there are so many people who fall prey to these types of creative marketing scams.
BTW, thank you for your blog! It pushed me to finally follow through and do my own :) You inspired me!