Only if you don't fall into one of their traps
Same as Cash?
by Damon Carr
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At some point in time you have heard one of these advertisement: Pay in 90 days same as cash. Zero interest, buy now. Pay later, no finance charges until January, etc.
(Spoken in my best Forrest Gump impression) "Mama always said, everything that shines isn't gold."
I recently had a close friend send me an email about this. He wondered what I thought about those programs that offer 90 days same as cash. He had used several of those programs before with no problem. His concern now is that he is currently 90 days late on one of his bills. He wanted to know how would they view his late payment? My answer to him was as follows.
First and foremost, you may want to ask yourself this question: "If I am 90 days behind on one of my bills, do I really need to be considering accumulating more debt?"
Most lenders value the payment history on the accounts that are similar to the loan for which you are applying. For example, a mortgage company's biggest concern is how well you pay your mortgage/rent on time. Let's assume that you have a clean mortgage payment history and a poor payment history on one or two car loans. How do you think that car lender will evaluate your credit? If you said that they would have some concern, you guessed correctly. The car lender may approve you with a bump in the rate or they may turn you down altogether.
In your case if the 90-day late payment is an isolated incident they will more than likely approve you, with a bump in the rate of course. It will be better if you bring the account current prior to applying.
Are you heading for debt trouble? This simple checklist can help you find out and provide options for doing something about it.
About pay in 90 days same as cash and similar programs:
Think about it. In this money driven society, do you really think anybody, more specifically, a company, is going to give you or I anything for free? What are the tangible benefits for the companies offering such a product?
Midsize and large companies spend millions upon millions of dollars researching buying habits, payment habits, average height of a male/female, current trends etc. These companies strategically place items that appeal to women on shelves five feet high. Why? Because the average woman is 5' 5" tall. Ever wondered why the check out aisles contain candy, magazines and gum? Because these are items that people buy on impulse. Ching..Ching-more money for them. I wonder what they know about people who purchase items under the arrangement plan of 90 days same as cash.
For starters, the concept of pay in 90 days same as cash is nothing new. Credit card companies have been offering a similar program for years. If you pay off your credit card balance in 30 days you avoid finance charges. Remember that outfit you bought and promised you would pay for as soon as you got paid? Ten years later and you are still making payments.
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for less money?
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The goal with this pay in 90 days same as cash program is to create a flow of traffic in the store. Once they get you in the store, they know you will more than likely be interested in purchasing more than one product. To offset cost, they inflate the prices on the merchandise. More importantly, they know that 70% of the people who purchase these items will not pay it off in 90 days. They have a clause on these agreements which states if not paid in full in 90 days the interest starts accruing from the day of purchase. The rate on this product if roughly 24%. They will also try to sell you overpriced insurance to pay off the 24% loan if something was to happen to you.
In closing, the best loans are those which have a deductible tax incentive such as a mortgage or a student loan or those with a very attractive interest rate. It would be great if you can get both the tax incentive and the low rate. Zero interest would be great. Just make sure you pay it off in 90 days!
Damon is the owner of ACE Financial. Damon has a solution for your financial problems and a plan to help you reach your financial goals - regardless of current financial status!
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