How often have you gone to a store just to look around and ended up buying something you didn't need? Well, you are not alone. Many of us go to furniture stores and supermarkets to look at appliances, beautiful blue couches, and classic coffee tables. Scouting can't hurt, right? But then you see an offer you just can't refuse.
The salesman tells you about a payment plan called "90 days same as cash," which sounds interesting. With this offer, you can take your favorite piece of furniture or appliance home right now without paying anything, and you have 90 days to pay for it. Isn't it interesting?
It might be hard to say no to deals like this, but if you aren't careful, you could end up in a lot of debt. Let's talk about what 90 days same as cash means and how it works.
Same as cash risks
Before you sign up for 90 days same as cash, it's important to know what could go wrong. It's a financing offer with deferred interest, which means that the interest will start to be charged from the date of purchase if you don't pay on time.
If you buy something for $3,000 but can only pay $1,000 in 90 days, you will pay interest on the full $3,000 at the end of the 90-day period, not just on the remaining $2,000. In this case, the interest will be added to the balance from the date of purchase backward.
In a perfect world, you would be able to finance the purchase and pay it off without having to pay any interest. However, this is not always the case. You might think you can pay off the balance, but something could happen to throw your finances off. This is something the store knows, which is why they want to offer this deal. The interest rate can sometimes be as high as 24 or 36 percent.
Almost 80% of people who choose these deals don't pay off the full balance by the end of the 90-day period. Even if you are very responsible, life may throw you little emergencies that force you to go in a different direction. You could also be one of the 20% of people who paid off the balance and paid in full, but if you had saved up for the purchase, you wouldn't have had to worry about interest in the first place.
If you are late on a payment, the deal can also go bad. Some programs will cancel the special right away, even if you are late by just one day, and you may have to pay finance charges.
If you don't think you can pay for something in full, you might also have trouble getting a loan to pay for it. When money is tight, it's best to save up for big purchases so you don't get into trouble. Use the 90 days to save up for the purchase, and then go to the store. It will teach you to save money and you may find that you don't want the things as much as you thought you did.
You could also use a debit or credit card to pay for the item. It will work a lot better than the deal for financing. If you qualify for a credit card with a 0% introductory rate on purchases, you will have enough time to pay off the balance, and even if you can't, you won't have to pay interest until the end of the promotional period. Still, the interest is not calculated backwards, as it is with 90-day cash financing.
If you want to stay in charge of your money and you don't have any appliances or furniture, this is an option. In the meantime, buy a used appliance that can do the job. Decide if you can live without the item for now. If you can't, go to a second-hand store and look for used versions of the item. You might find a good deal here.
When you want to buy something big, you might want to apply for a personal loan with low interest. But your credit score will be very important in this case.
If you already have money set aside for your purchase and know for sure that you can pay off the amount in 90 days, you might want to think about the deal. Still, you might be able to make the payment on time if you have 70% of the amount and a steady flow of cash. If that's the case, it might be a good option for you.
If you don't have good money management skills and often buy things on the spur of the moment, 90 days same as cash is not for you. It could get you into a lot of trouble and cost you a lot of money. Look at your finances and then decide if you can pay back the money in 90 days. It might not be the best thing to do.
Several companies offer this deal to get you to buy something you might not have otherwise. They know that not everyone will be able to pay off the debt and will have to pay interest, which can be used as extra money. So, if you want to buy something but don't have the money, start putting money aside. With deals like "90 days same as cash," you could quickly end up paying a lot of interest.
