The Pitfalls Of 0% Offers

With the holiday season also comes a lot of opportunities to get 0% financing on a variety of high ticket items. While these can be great ways to save money if you were planning to purchase the item anyway, they come with pitfalls for many others. It’s important to remember it isn’t a deal no matter what the price if you really don’t need it.

One of the biggest problems that consumers have when using the 0% financing is that they opt to upgrade the item they’re purchasing – spending more on it than they had planned or budgeted for it. The other is that even though they have the best intentions to pay off the item before the 0% offer expires, they often don’t follow through and end up with a balance that has an interest rate at 20% or more.

Stores offer these 0% deals because they know this will happen. They don’t offer the 0% incentive because they are nice, but because they know that it will earn them money in the long run. They have models that can predict approximately what percentage of the people taking the 0% offer will end up paying interest on the offer because they can’t pay off the amount before the 0% offer expires.

If you do decide to take advantage of one of these offers this season, make sure not to fall into the 0% financing traps. Stick with what you originally planned to purchase and don’t spend more or get something fancier due to the free financing. If you have the money already, stick it in an online bank and don’t use it for other expenses so that it is there when the 0% financing expires. If you don’t have the money, divide the number of months by the price of the item you purchased and make sure to set aside this amount from your budget each month so that you have the full amount to pay off the purchase when the 0% offer expires.

Much like credit cards, these 0% offers can be used to your advantage as long as you take care and make sure that you pay off the purchase in time. If not, you’ll find that your purchase wasn’t near the deal that you thought it was and may cost you hundreds more than you ever expected.

This entry was posted in Holidays. Bookmark the permalink.

5 Responses to The Pitfalls Of 0% Offers

  1. Seattle says:

    I have successfully used 0% financing in the past, always closing the credit account when I have paid off the amount. These are great tips. Thanks for sharing!

  2. Neo says:

    When I finally started getting smart with my money, I wanted to get my two credits paid off. So I was able to get approved for one of these 0% offers. The key as you stated was making sure not to mess up otherwise all that work would be for nothing.

    Speaking of 0% offers, I have posted the next Poll of the Week “How many 0% balance transfers have you done?”. If you have played the 0% balance transfer game, please complete the poll located the following URL:


  3. ray mylar says:

    Your forgetting something! My FICO was 805. After 3 zero interest loans ( average $2,500 ), I was turned down for the best car ins. rate because I had too much “new” credit!! I have NO debts. No morgage. No car payments etc. These loans were all done within 12 mos.due to a chance in circumstances. I could have paid cash, but left the funds in Emigrant Direct @ 4%. Be careful!!

  4. ray mylar says:

    Addition to previous response. I did not ask for a Visa/MC from any of the zero % lenders, but received one from each!!

  5. Jonathan says:

    Good advice in general, never borrow to buy something you don’t need in the first place.

    Ray, after just $7,500 in loans? I have State Farm and they never blinked an eye, and I’ve had lots more than $7,500. I’d re-shop around for car insurance, I bet you could get a better deal.

Leave a Reply

Your email address will not be published. Required fields are marked *