You see the ads everywhere. "Buy Now, 90 days, Same As Cash" or "No Interest for a Year" or some other eye-catching but truly ludicrous statement designed to draw in the unwary consumer.

Like a fly into the spider’s web, these kinds of advertisements bring in buyers with the lure of getting something and not having to pay on it for a long, long time. Businesses use this type of ad to get the swing buyer (the ones that are looking at high-ticket items, but are not buying because of the ’sticker shock’) to come in and buy.

The only problem with this scenario is that it’s not really Same As Cash. What’s actually happening is that you’re buying something on deferred interest. What that means is when you go in and get that washer/dryer on 12 months no interest, you’re actually accruing interest from day one. The trick is that if you pay off the whole amount within the year, they deduct all that interest back off.

Businesses like this for a couple of reasons;

They make the sale – No matter if they get interest or not, they’ve made a sale that they probably wouldn’t have made otherwise because the item is relatively expensive. They HOPE you default on the loan – A year is a long time, and a lot can happen. Remember, You’re accruing interest from day one, it’s just not applied if you pay everything off. If you DON’T, you get whammied with an extra few hundred/thousand dollars in interest fees.

Remember the story of the Thief and the Pig

A Thief was apprehended for stealing a pig and was brought before the king for sentencing. The King Says "I sentence you to death, for pig theft!" But the Thief says "O wise king, if you give me a year, I will make this pig sing. That would surely make up for my crime. No one in the kingdom has a singing pig." The King thought for awhile and then said, "Very well, you have one year to teach this pig to sing." and released the Thief. The Thief takes the pig and whistling, leaves the castle where he meets his friend. The friend says, "Why are you so happy?!?? You know that pigs don’t sing, and that means that you’re going to be executed!" But the Thief replied, "A year is a long time, and the King is old. In that year, the King may die, or I might die,.. Or, you never know, the pig might sing."

There’s a lot that can happen in the intervening time between when you BUY the item and the time you PAY OFF the item. They’re hoping that something will cause you to mess up at the end and then they get a lot more money from the accrued interest that’s been lurking in the background, just waiting to pounce.

Doesn’t SEEM Like It’s the Same

Same as cash? I don’t seem to remember an instance where I continued to pay on something after I paid cash for it. Nor do I remember anyone tacking on interest for something I paid cash for. I think it’s fair to say it’s VERY DIFFERENT than cash.

It’s not a bad offer to get to pay over time w/o having to pay interest, but you just have to have enough self-control to follow through and make sure it gets paid off. Otherwise you fall into the spider’s (interest) trap!

————————————————————–

Finding the best credit card you can is essential for establishing good credit for yourself. There are many different business credit cards that have different options with their credit cards so people should really try to attain a good low interest credit card