Most homeowners may already know this, but since I’ve never had to purchase a bunch of large appliances, I only noticed this recently while fawning over fancy appliances (Man, I’m getting old). When stores like Home Depot, Lowes, or Best Buy offer “No payments and no interest for 12 months”, it’s true, but with an interesting catch. If you don’t pay in full before that 12 months ends, they will charge you back interest for the full price of the purchase from the date of purchase, often at about 20% APR! It doesn’t just start accruing from when the promo period ends.
Here’s an example. You buy a nice stainless steel fridge and oven range for $1,500. You’re happy, paying nothing for 364 days. If you pay it off early, you pay $1,500. If you figure, well, I’ll wait after the whole 12 months is up and then start paying it off, you get to pay $1,800 ($300 more!)
And since you have to suffer a hard credit check anyways, unless you’re making a huge purchase, getting this 0% financing may not be worth it even if you do pay it off on time. Remember, hard credit pulls are worth money. It would probably be better to first purchase it with an existing rewards card and get 1-5%* cashback, and then pay off that card with cash or part of a (probably much larger) 12-month long 0% balance transfer that won’t charge you back-interest.
Best Buy offer terms:
No minimum purchase required.
Required minimum monthly payment is greater of $10 or 1% balance plus billed Finance Charges plus any late fees (if applicable). Interest will be charged to your account from the date of purchase if plan balance is not paid in full within 90 days or if minimum monthly payments are not made… Variable Standard APR = Prime Rate + 14.4 percentage pts. (22.4% as of 06/01/06).
Lowes offer terms:
*Applies to single-receipt, in-store purchases of $299 or more made now through July 9, 2006 on a Lowe?s Consumer Credit Card account. No monthly payments will be required and no finance charges will be assessed on this promotional purchase if you pay the following in full within 12 months: (1) the promotional purchase amount, and (2) any related optional credit insurance/debt cancellation charges. If you do not, finance charges will be assessed on the promotional purchase amount from the date of purchase and monthly payments will be required. Standard account terms apply to non-promotional purchases. APR is 21% (15.48% for purchases of $2,000 or more). Minimum finance charge is $1.00.
* 5% back at Home Depot, how do I do that? Well, it’s a bit round-a-bout, but you can by The Home Depot gift cards at grocery stores like Safeway using your Citi Dividend card that gives 5% back at grocery stores. Then just got to Home Depot and make your purchase! You may have to buy multiple cards in smaller amounts for larger purchases.