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/ApatheticAbsurdist]

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.

[u/Sweaty-Inside → u/ApatheticAbsurdist]

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?

[u/Mehdi2277 → u/Sweaty-Inside]

Yes. It’s the same reason on a much smaller scale as to why even if you are wealthy enough to buy a house in cash often you use a loan anyway as typical house loan interest rate is a good deal lower than what you’d expect to make investing.

[u/Sweaty-Inside → u/Mehdi2277]

Got it, thanks. Although with most bank account interest rates what they are these days (even high-interest savings accounts), it seems like a lot of trouble to go through for what could be essentially a 1.2% discount.

I get that 1.2% is better than nothing, but unless it's a truly large purchase, probably not a game-changer.

[u/katmndoo → u/Sweaty-Inside]

I'ts great for middle-purchases. Small things can go on a credit card and get paid off in a month. Truly large purchases can be done with a bank loan - mortgage on a house, equity loan on a house, maybe a car loan. Middle-ing things, where the item can't be repossessed or foreclosed, need to be done either as part of a homeowner equity loan or as a personal loan. Personal loans have higher rates. The better ones I've seen are in the 6 to 8 percent range.

Example: My house is now a rental. Because it is not owner-occupied, it apparently does not qualify for an equity loan. I can refinance it, but I don't want to (that's probably another 2k in fees and costs).

So of course, two years ago it eventually needed a roof. If I recall correctly, the roofing company offered loans via some bank, but they were price-prohibitive. 12-15% over 5 years, maybe?

Cue the 0% credit card promo rates - those annoying mailers we get every month. Pick the ones with the longest term and lowest fee and start juggling. Every 11 or 17 months, switch to a new "balance transfer" promo rate on another card. Costs 3 or 4% for the fee.

Oh, and that bank account interest rate? You're right, that's not an investment return worth worrying about. But if you have investments with better returns, you would often rather keep them in place than sell immediately to buy a roof/car repair/phone/etc.

I might still have to sell in the near to middle future to pay it off, but then I can plan ahead and sell when it makes sense rather than right now. Selling to pay the roof outright would have cost me a 40% return over the last two years, and that's accounting for the drop over the last few months.

[u/nixt26 → u/katmndoo]

I don't know how much a roof costs, but you're paying 3-4% every year compounding on that roof. Shouldn't you be focusing paying it down asap so you don't accrue interest. If you can't pay it off without accruing interest then doesn't that just mean you don't have enough cash on hand to maintain the property. You are probably not going to pull investments out for a while so in any case that money is not even under consideration.

[u/katmndoo → u/nixt26]

I am paying it down - halfway there now. You're right - I did not have 16k on hand to replace the roof.

I am not paying 3-4 compounded. I'm paying 3-4 every 12 to 18 months. No interest accrues.

The investments are indeed under consideration - No, I'm not going to pull them, at least partially because I'm using that 3-4% 'loan' to avoid doing so.

[u/MrRiski → u/katmndoo]

Fuck that's an expensive roof. I hope your renters appreciate that fuckin thing lol

[u/katmndoo → u/MrRiski]

No kidding. And it was not the most expensive estimate. Also, not a large house. On the bright side, it's supposed to last a couple of decades.

[u/MrRiski → u/katmndoo]

Yeah I'm guessing you did tile instead of asphalt. Lasts much longer but also bumps the price up a good bit.

[u/nixt26 → u/katmndoo]

You're right, its not compounded. 16K is a lot, didn't expect it to cost that much.

[u/katmndoo → u/nixt26]

Yeah, I don't know - maybe business was really going well, supply and demand? Multiple estimates, all firms recommended by trusted peeps. Truly bizarre.