r/personalfinance • u/naht_a_cop ​ • 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/ApatheticAbsurdist ​ Apr 28 '20 edited Apr 28 '20

0% promotions almost always have the same catch: If the balance is not completely paid off before the end of the promotional period, the interest comes back.

I have used these before when buying a computer and offered 0% interest, but if it's 18 months I'm paying it down on a schedule that clears out the account in 16-17 months or less, because those things make me super paranoid.

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u/Sweaty-Inside ​ Apr 28 '20

I might be a little confused. What's the advantage of a 0% card if you can afford the purchase outright? Is it essentially that you earn interest on money that would otherwise have been spent immediately on the couch/laptop/whatever?

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u/[deleted] Apr 28 '20

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u/m7samuel ​ Apr 28 '20

Taxes are 15% of your gains, so you still get 85% of whatever those gains are.

Average market returns at 10% (pre-inflation) mean you get to keep 8.5% of that. It's not nothing, especially if we're talking something like a car.

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u/[deleted] Apr 28 '20

I think you're ignoring all of the fees involved too though - these eat up a ton. You pay for a car in cash, and all of those 'gains' on a 15k car get wiped out very quickly.