Nothing Else Is Quite The “Same As Cash”
January 24th, 2008 | by rachel |
It is virtually impossible to watch television or read newspapers without seeing ads for “same as cash” financing options. On first look, those options seem very appealing, especially for large purchases. In fact, there doesn’t SEEM to be a downside to “same as cash” promotions. What’s not to like about no down payment, 0% interest, and deferred payments? Maybe nothing. Before you sign one of these great deals, however, be sure to understand all aspects of the agreement. Once you do, you may agree that nothing else is quite the same as cash!
One thing consumers should always remember is that retailers are motivated by store traffic and profits, not by providing convenient payment options for customers. Managers of chain stores are, often, in competition with other store managers. In addition to merchandise quotas, sales personnel are trained and rewarded for initiating applications for store credit cards, extended warranties and any number of “add-ons”. Technically, a “same as cash” offer does not qualify as an add-on. Offering such an option is meant to increase store traffic. When it does, there are more opportunities to “sell” customers on things that make money for the store.
Certainly, “Same As Cash” advertisements are appealing, but they don’t tell the whole story. Specifically, these things are either in the “fine print” or left out completely when someone is trying to talk you into “same as cash” financing:
- 70% (or more) of people that use “same as cash” financing won’t pay off the balance during the grace period.
- Prices of items in the store are often inflated to balance out savings on promotional financing.
- Promotional financing offers are likely to include VERY high interest rates. Rates that are much higher than traditional credit card rates.
- Many “same as cash” offers include hidden fees and unauthorized enrollment in programs that protect the store’s interest, not the customers. Debt cancellation and credit insurance programs are some of the more common names for these programs. These, and other credit protection programs like them, are optional for consumers but lucrative for retailers. They are largely unregulated and highly profitable because they are not administered by 3rd party agencies.
- Regardless of what it sounds like, a “same as cash” deal is NOT A FREE LOAN. Instead, it is a “deferred interest” program. That means that, if the entire balance is not paid during the grace period, interest is charged for the entire amount, not just the portion left unpaid. Additionally, interest is calculated from the date of original purchase, not from the end of the grace period. Those terms of the agreement (sometimes hidden in the fine print) can add hundreds of dollars to the overall purchase.
- Making minimum payments as calculated in the monthly statements will NOT be enough to pay off the entire balance during the grace period. Also, ANY late payment triggers default and any penalties that go along with it.
Ultimately, cash allows for flexibility and control over purchases. It also keeps consumers from going further into debt while providing them a negotiation tool that can lead to a lower purchase price. Operating with cash, in the long run, provides the most financial freedom possible. When using cash, there is nothing hidden and no fine print to be concerned about. Say what you will about good deals and free financing; at the end of the day, there really is nothing else quite the “same as cash”!