Buying with no interest

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Thegame14
Posts: 445
Joined: Mon May 07, 2018 11:53 am

Buying with no interest

Post by Thegame14 » Thu Nov 29, 2018 3:56 pm

For a few items, carpet for the house, and thinking of buying a new mattress and a new TV. Most of these places offers either 6 months or 1 year of no interest, with a credit card sign up. I don't care about opening a CC or not, it wont affect my credit score and even if it did DW and I both have credit scores in the 810-820 range.....

So Boglehead philosophy wise, is it better to use a no interest CC, and make all the payments to pay no interest, but have to worry about setting up online payments or writing checks, and having extra debt, vs paying on a CC where I get 1.5% cash back, and pay in 30 days in full?

What do you do with these types of purchases? I like the idea of no interest and paying a little at a time, vs taking a one time "big" hit, plus I get cashback/points. I am thinking of upgrading TV and Mattress as both are 8 years old and I can use my bonus or save a little each month with side income coming in for it.... Will ask for reco's for TV and mattress in another thread

cashisking500
Posts: 38
Joined: Fri Dec 02, 2016 1:08 pm

Re: Buying with no interest

Post by cashisking500 » Thu Nov 29, 2018 3:59 pm

For these types of purchases, I typically use my credit card to get the points/cashback and then pay it off when it comes due. I hate having payments, so I very rarely finance things if I can help it.

neilpilot
Posts: 1915
Joined: Fri Dec 04, 2015 1:46 pm
Location: Memphis area

Re: Buying with no interest

Post by neilpilot » Thu Nov 29, 2018 4:06 pm

cashisking500 wrote:
Thu Nov 29, 2018 3:59 pm
For these types of purchases, I typically use my credit card to get the points/cashback and then pay it off when it comes due. I hate having payments, so I very rarely finance things if I can help it.
+1
Also if it's a large purchase I sometimes ask if there's a discount if I pay now rather than take 0% financing. This has worked on occasion.

UpperNwGuy
Posts: 1233
Joined: Sun Oct 08, 2017 7:16 pm

Re: Buying with no interest

Post by UpperNwGuy » Thu Nov 29, 2018 4:38 pm

I would not incur debt for household purchases like carpet, mattresses, or televisions. Save the money first. Pay for these household items with a 2% cash back credit card, and pay the credit card off as soon as the statement cuts.

The only items for which I would incur debt are houses or automobiles, and even then I would not finance the full cost.

barnaclebob
Posts: 3072
Joined: Thu Aug 09, 2012 10:54 am

Re: Buying with no interest

Post by barnaclebob » Thu Nov 29, 2018 4:48 pm

Too much of a pain to open a cc for zero interest on a couple grand.

megabad
Posts: 828
Joined: Fri Jun 01, 2018 4:00 pm

Re: Buying with no interest

Post by megabad » Thu Nov 29, 2018 4:53 pm

Thegame14 wrote:
Thu Nov 29, 2018 3:56 pm
For a few items, carpet for the house, and thinking of buying a new mattress and a new TV. Most of these places offers either 6 months or 1 year of no interest, with a credit card sign up. I don't care about opening a CC or not, it wont affect my credit score and even if it did DW and I both have credit scores in the 810-820 range.....

So Boglehead philosophy wise, is it better to use a no interest CC, and make all the payments to pay no interest, but have to worry about setting up online payments or writing checks, and having extra debt, vs paying on a CC where I get 1.5% cash back, and pay in 30 days in full?

What do you do with these types of purchases? I like the idea of no interest and paying a little at a time, vs taking a one time "big" hit, plus I get cashback/points. I am thinking of upgrading TV and Mattress as both are 8 years old and I can use my bonus or save a little each month with side income coming in for it.... Will ask for reco's for TV and mattress in another thread
What is the lost opportunity of the money that would pay for the mattress/TV? In my experience, I usually cannot find a financing deal and safe investment that is more attractive than 2% cashback (on a net basis). In fact, I would buy cars on my rewards card if I could, but understandbly most dealers limit this.

Living Free
Posts: 128
Joined: Thu Jul 19, 2018 7:31 pm

Re: Buying with no interest

Post by Living Free » Thu Nov 29, 2018 5:14 pm

I agree with paying cash (or rather paying with a cash back credit card and then paying that off right away).
I don't think it's worth it to go through the hassle of financing this and further I'm philosophically against using credit to purchase depreciating consumer items. Paying with cash has many benefits, including foremost that you feel the full brunt/pain of the purchase right away so it may compel one to spend less on consumer items (or at the very least to think very hard about it).

Nissanzx1
Posts: 341
Joined: Wed Jul 18, 2018 11:13 pm

Re: Buying with no interest

Post by Nissanzx1 » Thu Nov 29, 2018 5:14 pm

These are all purchases that aren't surprises. Just pay for them and move on. Life will be easier.

Thegame14
Posts: 445
Joined: Mon May 07, 2018 11:53 am

Re: Buying with no interest

Post by Thegame14 » Thu Nov 29, 2018 5:23 pm

megabad wrote:
Thu Nov 29, 2018 4:53 pm
Thegame14 wrote:
Thu Nov 29, 2018 3:56 pm
For a few items, carpet for the house, and thinking of buying a new mattress and a new TV. Most of these places offers either 6 months or 1 year of no interest, with a credit card sign up. I don't care about opening a CC or not, it wont affect my credit score and even if it did DW and I both have credit scores in the 810-820 range.....

So Boglehead philosophy wise, is it better to use a no interest CC, and make all the payments to pay no interest, but have to worry about setting up online payments or writing checks, and having extra debt, vs paying on a CC where I get 1.5% cash back, and pay in 30 days in full?

What do you do with these types of purchases? I like the idea of no interest and paying a little at a time, vs taking a one time "big" hit, plus I get cashback/points. I am thinking of upgrading TV and Mattress as both are 8 years old and I can use my bonus or save a little each month with side income coming in for it.... Will ask for reco's for TV and mattress in another thread
What is the lost opportunity of the money that would pay for the mattress/TV? In my experience, I usually cannot find a financing deal and safe investment that is more attractive than 2% cashback (on a net basis). In fact, I would buy cars on my rewards card if I could, but understandbly most dealers limit this.
I hear you, I would love to pay for my mortgage and taxes on a credit card to get the 1.5% cash back plus get 1 month float, but you cant do that easily.

delamer
Posts: 6384
Joined: Tue Feb 08, 2011 6:13 pm

Re: Buying with no interest

Post by delamer » Thu Nov 29, 2018 9:33 pm

The advantage of the 0% financing is keeping a portion of your money invested. I suspect that the actual dollars that you would gain with 2% interest (for 6 months or a year) is trivial. Even $10,000 at 2% for a whole year is just $200.

Not to mention that you lose your reward card benefits.

User avatar
prudent
Moderator
Posts: 5769
Joined: Fri May 20, 2011 2:50 pm

Re: Buying with no interest

Post by prudent » Thu Nov 29, 2018 9:43 pm

It's been a while, but once we were buying a couple items of furniture and they were offering 0% for 12 months. I wanted to pay with my cashback credit card and asked what the price would be if I paid now instead of taking the 0% deal figuring there would be some type of discount. The salesperson got the manager who told me the price would be the same, because it cost the store nothing to offer the 0% deal - whatever finance outfit they were using paid the store immediately the full amount of the sale. Apparently the finance company made enough money from the people who don't pay in full, on time, in 12 months and get hit with the retroactive finance charge of 18% or whatever it was.

TheHouse7
Posts: 388
Joined: Fri Jan 13, 2017 2:40 am

Re: Buying with no interest

Post by TheHouse7 » Thu Nov 29, 2018 10:31 pm

Living Free wrote:
Thu Nov 29, 2018 5:14 pm
I agree with paying cash (or rather paying with a cash back credit card and then paying that off right away).
I don't think it's worth it to go through the hassle of financing this and further I'm philosophically against using credit to purchase depreciating consumer items. Paying with cash has many benefits, including foremost that you feel the full brunt/pain of the purchase right away so it may compel one to spend less on consumer items (or at the very least to think very hard about it).
+1
"PSX will always go up 20%, why invest in anything else?!" -Father-in-law early retired.

kjvmartin
Posts: 1266
Joined: Wed Jan 21, 2015 8:57 am

Re: Buying with no interest

Post by kjvmartin » Thu Nov 29, 2018 11:00 pm

Thegame14 wrote:
Thu Nov 29, 2018 3:56 pm
it wont affect my credit score and even if it did
I am wondering where you got this idea from. Opening a credit card is a hard pull on your credit which is an automatic score reduction. You will then have a brand new account, thereby lowering the average age of all of your accounts. This is a score reduction

User avatar
JoMoney
Posts: 6257
Joined: Tue Jul 23, 2013 5:31 am

Re: Buying with no interest

Post by JoMoney » Thu Nov 29, 2018 11:07 pm

Zero interest retail loans often come with "gotchas", and if you miss some small print they can retroactively charge interest or a large fee. Be careful.

I greatly prefer 2% cash back immediately on a reward credit card paid off at the end of the billing cycle compared to the less than 2% interest that money would earn spread out over a year or more trying to arbitrage the difference between a "0% loan" and what my money market will pay me.
If you didn't actually have the cash to pay for the item, a 0% loan might be more enticing, but I would suggest you probably shouldn't be buying things you can't afford.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

SoAnyway
Posts: 229
Joined: Tue Jul 31, 2018 11:49 pm

Re: Buying with no interest

Post by SoAnyway » Thu Nov 29, 2018 11:29 pm

UpperNwGuy wrote:
Thu Nov 29, 2018 4:38 pm
I would not incur debt for household purchases like carpet, mattresses, or televisions. Save the money first. Pay for these household items with a 2% cash back credit card, and pay the credit card off as soon as the statement cuts.
+1.
UpperNwGuy wrote:
Thu Nov 29, 2018 4:38 pm
The only items for which I would incur debt are houses or automobiles, and even then I would not finance the full cost.
Assuming you're not in the RE business, OP, yes on the house you live in. No on cars. "Maybe" on education, dep. on the ROI.

User avatar
willthrill81
Posts: 6411
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: Buying with no interest

Post by willthrill81 » Fri Nov 30, 2018 12:27 am

JoMoney wrote:
Thu Nov 29, 2018 11:07 pm
Zero interest retail loans often come with "gotchas", and if you miss some small print they can retroactively charge interest or a large fee. Be careful.

I greatly prefer 2% cash back immediately on a reward credit card paid off at the end of the billing cycle compared to the less than 2% interest that money would earn spread out over a year or more trying to arbitrage the difference between a "0% loan" and what my money market will pay me.
If you didn't actually have the cash to pay for the item, a 0% loan might be more enticing, but I would suggest you probably shouldn't be buying things you can't afford.
:thumbsup :beer
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

MikeG62
Posts: 1217
Joined: Tue Nov 15, 2016 3:20 pm
Location: New Jersey

Re: Buying with no interest

Post by MikeG62 » Fri Nov 30, 2018 7:34 am

megabad wrote:
Thu Nov 29, 2018 4:53 pm

...What is the lost opportunity of the money that would pay for the mattress/TV? In my experience, I usually cannot find a financing deal and safe investment that is more attractive than 2% cashback (on a net basis). In fact, I would buy cars on my rewards card if I could, but understandbly most dealers limit this.
+1
Real Knowledge Comes Only From Experience

UpperNwGuy
Posts: 1233
Joined: Sun Oct 08, 2017 7:16 pm

Re: Buying with no interest

Post by UpperNwGuy » Fri Nov 30, 2018 11:55 am

SoAnyway wrote:
Thu Nov 29, 2018 11:29 pm
UpperNwGuy wrote:
Thu Nov 29, 2018 4:38 pm
I would not incur debt for household purchases like carpet, mattresses, or televisions. Save the money first. Pay for these household items with a 2% cash back credit card, and pay the credit card off as soon as the statement cuts.
+1.
UpperNwGuy wrote:
Thu Nov 29, 2018 4:38 pm
The only items for which I would incur debt are houses or automobiles, and even then I would not finance the full cost.
Assuming you're not in the RE business, OP, yes on the house you live in. No on cars. "Maybe" on education, dep. on the ROI.
Interesting viewpoint. For me, yes on cars. No on education.

Broken Man 1999
Posts: 1564
Joined: Wed Apr 08, 2015 11:31 am

Re: Buying with no interest

Post by Broken Man 1999 » Fri Nov 30, 2018 1:46 pm

I pay for purchases differently at different times.

1, I sometimes pay cash, usually someplace that doesn't accept credit cards, or imposes a fee for using a credit card, or I'm dealing with a small business and I don't want to add to their expenses.
2. I sometimes use a 2% rebate credit card.
3. I sometimes use zero interest opportunities, either offered by the merchant, or using a balance transfer card. Our current living room furniture is being paid via the offer of extended payments for number of years @ 0% interest.
4. I sometimes use a combination of the above, such as getting a 2% rebate, then transferring to a credit card offering 0% for X number of months.

It really depends on where we are at in the tax brackets, or the likelihood we can pay the balance off in the deferred interest length with little stress to our budget. And, that position in the tax brackets is dependent on our expenses.

I have zero intention of having to pay interest, in any circumstance.

Earlier this week I purchased new kitchen appliances. My next credit card due date is in January, 2019. With that purchase made, and deferred into 2019, I am no longer worried about ending up in the 22% tax bracket. I now have headroom for the deposit to order cabinets, and flooring.

I will be doing the same dance in 2019, and 2020. Been doing it for years. I could just pay everything, but that takes all the fun out of it. And, I really really like staying as fully invested as I can.

My goal is to pay for our remodeling expenses over three years; 2018, 2019, 2020, without incurring interest, and getting as much as we can via rebate cards, while staying in the 12% tax bracket. Although a shallow dive into the 22% bracket would be OK.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

wfrobinette
Posts: 726
Joined: Fri Feb 20, 2015 3:14 pm

Re: Buying with no interest

Post by wfrobinette » Mon Dec 03, 2018 4:42 pm

Thegame14 wrote:
Thu Nov 29, 2018 3:56 pm
For a few items, carpet for the house, and thinking of buying a new mattress and a new TV. Most of these places offers either 6 months or 1 year of no interest, with a credit card sign up. I don't care about opening a CC or not, it wont affect my credit score and even if it did DW and I both have credit scores in the 810-820 range.....

So Boglehead philosophy wise, is it better to use a no interest CC, and make all the payments to pay no interest, but have to worry about setting up online payments or writing checks, and having extra debt, vs paying on a CC where I get 1.5% cash back, and pay in 30 days in full?

What do you do with these types of purchases? I like the idea of no interest and paying a little at a time, vs taking a one time "big" hit, plus I get cashback/points. I am thinking of upgrading TV and Mattress as both are 8 years old and I can use my bonus or save a little each month with side income coming in for it.... Will ask for reco's for TV and mattress in another thread
I've done it and will continue to do so as long as it's 0%. $1 is worth more today than $1 is tomorrow. I get to let the full purchase price ride along in MM collecting 2+% and the last dollar I pay is the equivalent to $0.95 today. I pay the min payment then lump sum the remainder in the last month of the promotion.

So for $1000 purchase I earn $38.50 in interest(2.5%) when paying $20 per month for 23 months and a lump sum of $540 in month 24. With inflation (2.5%) my principal payments are = $942.38 in today dollars

By taking the 2% cashback of $20 that grows to 21.02 over the same 24 month period.

Thegame14
Posts: 445
Joined: Mon May 07, 2018 11:53 am

Re: Buying with no interest

Post by Thegame14 » Mon Dec 03, 2018 4:54 pm

wfrobinette wrote:
Mon Dec 03, 2018 4:42 pm
Thegame14 wrote:
Thu Nov 29, 2018 3:56 pm
For a few items, carpet for the house, and thinking of buying a new mattress and a new TV. Most of these places offers either 6 months or 1 year of no interest, with a credit card sign up. I don't care about opening a CC or not, it wont affect my credit score and even if it did DW and I both have credit scores in the 810-820 range.....

So Boglehead philosophy wise, is it better to use a no interest CC, and make all the payments to pay no interest, but have to worry about setting up online payments or writing checks, and having extra debt, vs paying on a CC where I get 1.5% cash back, and pay in 30 days in full?

What do you do with these types of purchases? I like the idea of no interest and paying a little at a time, vs taking a one time "big" hit, plus I get cashback/points. I am thinking of upgrading TV and Mattress as both are 8 years old and I can use my bonus or save a little each month with side income coming in for it.... Will ask for reco's for TV and mattress in another thread
I've done it and will continue to do so as long as it's 0%. $1 is worth more today than $1 is tomorrow. I get to let the full purchase price ride along in MM collecting 2+% and the last dollar I pay is the equivalent to $0.95 today. I pay the min payment then lump sum the remainder in the last month of the promotion.

So for $1000 purchase I earn $38.50 in interest(2.5%) when paying $20 per month for 23 months and a lump sum of $540 in month 24. With inflation (2.5%) my principal payments are = $942.38 in today dollars

By taking the 2% cashback of $20 that grows to 21.02 over the same 24 month period.
and it is also the not having to pay one big chunk at once. It is a lesser impact being smaller payments over time. which I guess you could somehow also think is a bad thing, but it isn't an impulse buy, I am thinking about a TV or mattress, both are 8 years old. TV want 4K TV and built in Netflix, currently using Wii for Netflix, which is annoying with the wand thing and WII isn't supporting Netflix in 2019, so then need to buy a new bluray player or TV for this reason anyway, and mattress is 8 years old and since then DW and I are starting to have back problems and I get up 2-3 times in the middle of the night and it wakes her up and she gets mad so a foam mattress with no weight transfer would improve our sleep and marriage

Thesaints
Posts: 1664
Joined: Tue Jun 20, 2017 12:25 am

Re: Buying with no interest

Post by Thesaints » Mon Dec 03, 2018 6:50 pm

Perhaps it is only me, but I continuously receive offers for credit cards at 0% APR for 12-18 months, with a few $100's bonus to boot.
Not clear why the OP would want to open a retailer card, while the above are available.

I'd say the true BH's philosophy would be to take on as much 0% credit as possible, as long as one doesn't use it to purchase things he/she wouldn't otherwise buy.

wfrobinette
Posts: 726
Joined: Fri Feb 20, 2015 3:14 pm

Re: Buying with no interest

Post by wfrobinette » Wed Dec 05, 2018 4:19 pm

Thesaints wrote:
Mon Dec 03, 2018 6:50 pm
Perhaps it is only me, but I continuously receive offers for credit cards at 0% APR for 12-18 months, with a few $100's bonus to boot.
Not clear why the OP would want to open a retailer card, while the above are available.

I'd say the true BH's philosophy would be to take on as much 0% credit as possible, as long as one doesn't use it to purchase things he/she wouldn't otherwise buy.
I think the convenience of opening 0% credit on the spot and walking out with the item is why I take it. I also signed up to block all credit offers. Was tired of all the junk mail.

Post Reply