Is 90 days really the same as cash?

Many stores offer 90 days same as cash deals especially this time of year to entice shoppers to spend even more on Christmas gifts. Seems like a good deal. I get what I want and I have 3 months to pay for it. Furniture companies often give even greater deals. I have often seen 2 or more years same as cash.

So isn’t this like free money? I’m beating them at their own game right?

Why 90 days isn’t the same as cash

They are still making a profit

First, let’s not be naive. Companies aren’t in the business of selling things at a loss. (And honestly I want them to make a reasonable profit on the sale.  If they are a good business that serves me well, then I want them to stay in business so they are there the next time I want to make a purchase.) Understand though that financing is often one of the most profitable areas of most business. If they are “giving that up” by offering you free financing, they must be still making money some how. Do you suppose that perhaps the financing profits might have just been rolled into the price of the item? Probably a pretty good chance of that. So you probably aren’t really saving as much as you think.

Ridiculous interest rates

The interest rate is 0% if, and only if, you pay it off in full within the 90 days. If you don’t pay it off within that time period in most cases the interest rate shoots up to 20-30%. Studies have shown that more than 80% of the time this is exactly what happens because people don’t pay the item off within the 90 days. So turns out they end up paying an interest rate they would have probably never signed up for in the first place.

Back charged interest

Making this even worse, most of these deals are set up such that if you don’t pay the item off within the 90 days, not only do you get hit with that exorbitant interest rate but generally you will be back charged that high interest rate for the 90 days where you had “free interest”.  So the end result is as if you had signed up for that 20-30% interest from the very beginning.

Many years ago I got burned by this gotcha. I had signed up for one of these deals and had paid most of it off but not quite all when the term expired. When I got my statement the next month my balance suddenly was more than $200 more. I called to ask what happened and they pointed out that since I didn’t pay it off within the stated term I was responsible for all the interest that would have been charged over that time. That was an expensive lesson.

Get a deal with cash

Lastly, you can often negotiate a much better deal with cash. This can be particularly true if you shop near the end of the month or the end of a quarter when they are likely trying to meet sales quotas. Cash tells the salesman a couple of things. First it tells the salesperson you are serious. When they see the cash in your hand they know you intend to buy. If they make you a deal they know they will get the sale. Second, there is no question about whether you will be approved for financing. The salesperson knows if they make you a deal there will be no unforeseen complications in making the sale.

You don’t know the future

Lastly, you don’t know the future. What if something unexpected happens? Suppose you lose your job or have an illness or accident that prevents you from working. Is it likely? Perhaps not. But none of us know what tomorrow holds and you could find yourself with a huge interest bill right when your income is suddenly much less than you anticipated.

It is hard to beat cash

The best choice is always to pay cash. That may sound simple and unsophisticated. But it also eliminates risk and offers you the best chance to get a real deal. It also keeps you from fooling yourself into thinking you can afford something when you really can’t. Cash makes it simple. If you have the cash you can afford it. If you don’t have enough cash, then you can’t.


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