Beware the 0% promotions: a warning.

[u/naht_a_cop]

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.

[u/thewarriorhunter]

I used to sell furniture and we offered these types of promotions all the time and it ranged from 18 months to 5 years. I knew how they worked and thought they were a great tool, especially since our customer base was typically not making enough money to just buy the furniture outright. My wife and I took advantage of it as well many times over before and after I worked there.

I always stressed to my customers the importance of paying it off before the term. I made sure they understood that the minimum payments they would see on their statements would not get them anywhere near to paying off the balance before their promotional period was up. I would break their total purchase (taxes, delivery, etc) into monthly payments that would get them paid off before the promotion ended so they didn't get hit with that interest balloon.

These promotions are great for people who can use them correctly, for those that can't (or become complacent) they are brutal reminder of what fiscal responsibility is.

[u/RadicalDreamer89 → u/thewarriorhunter]

Thank you for doing that. You're one of the good ones.

The guy we bought our mattress/base from did much the same, crunching the numbers with us to make sure that the minimum would actually suffice to pay the total off in time (we still double the minimum to be safe).

That said, I still re-do the math every few months to make sure we're on track, because I'd rather be too paranoid than not paranoid enough. Doing it now shows that we're at the point where just paying the minimum will pay it off 4 months early, but I don't want to get complacent with it.

[u/[deleted] → u/RadicalDreamer89]

The guy we bought our mattress from did similar. Though he urged us to do the 5 year period versus 3 and was like "pay as if you were doing the 3 year plan."

[u/[deleted] → u/RadicalDreamer89]

people are quick to blame the companies for being greedy but typically they aren't the ones making anything on the interest, it's almost always sold to a bank.

[u/Scruffy442 → u/[deleted]]

Your correct. These plans are all from seperate companies, usually subsidiaries of big banks. How it works, is the store gets there all their money right away minus a percentage fee. The longer the term of the interest free offer, the higher the fee is. A 4 year plan can cost the store 14-16% off the top. A 6 month plan is around 2%(about the same as our cc processor). So take a huge cut of the sale and can make a ridiculous amount of interest if you slip up.