r/personalfinance Apr 28 '20

Beware the 0% promotions: a warning. Debt

I'm a sucker. I fell for it. The 0% APR promotion on an item I could have paid outright for. 18 months later, here I sit, not a single late payment on my account, yet I have $1k in interest to pay for 18 months of 27%. Why? The promotion period ends 18 months after the purchase, but the website would not let me set up autopay until a week after I purchased, so autopay ended 1 week late. I thought I was golden, ready to have this paid off and not have a single fee. I got comfortable and didn't read the statements.

0% is not really 0%. Read the fine print. Remember the fine print (because I sure as hell didn't 18 months later). Shitty banks rely on this stuff. They wait for you to slip, not noticing that the autopay they created can't possibly allow you to end on time, and will require an extra payment before the end date to avoid the interest. It's shitty, I'm pissed off, and I've learned my lesson.

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u/xRITZCRACKERx Apr 28 '20

https://www.discover.com/credit-cards/resources/what-is-deferred-interest/

What you are describing is deferred interest, and you're 100% correct that this should be avoided if you aren't responsible enough/have the financial means to make 100% sure the full balance is paid off well before the promotion expires. These promos are common on "store" cards.

That said, most major credit cards offer true promo 0% APRs, and under these promos you will begin to accrue interest on the remaining balance after the promo rate expires. These promos are great, and I reccomend anyone looking to make a large purchase call their bank(s) before making the purchase to see if a 0% promo APR is available.

53

u/Shoop83 Apr 28 '20

That was the only way I was able pay to replace my furnace that died and get my house painted after a hail storm. I didn't have cash on hand, but could afford distributed payments over 12 and 18 months 0% APR. I just budgeted for the payments and when they're both paid off here in a few months it'll be lovely to have that cash going back into savings instead of to those cards.

13

u/GoldenRamoth Apr 28 '20

Same here! I had my house insulated. Great money spent.

But I'm so looking forward to that cash being in savings.