"Free!" Credit

[Broland]

I'm curious how many others utilize "free credit" (0% interest over time) and how you feel about it?

Although I have the means to purchase everything with cash, the allure of 0% is just too enticing! Now I have a sewing machine, home gym, truck and tires on the "free-money-train". I set up automatic payments so it's no burden or overhead on my part ... all automated. My self-rationalization is I get to keep the extra funds earning money in the market.

HOWEVER, having no other debt, this is starting to bug me. I'm actually thinking about just paying it all off so I don't think about it. Any others utilize these 0% promo's and ... does it bug you after a while?

 

[SecondCor521]

I don't utilize 0% interest situations. Based on the TANSTAAFL principle, I assume that if something I wanted were offered on a 0% interest plan, then the seller has built the financing costs and hassles into the price and I could just buy it now at a lower cash price. So for example, if I'm offered a home gym for $1K on a 0% for 12 months deal, I would probably just ask about getting it today for $950 cash.

I currently do float most of my purchases on a credit card and automatically pay in full and I do some small purchases on other cards for reasons, so I have credit card balances. Yes, those sometimes bug me, and I have prepaid them or paid them off ahead of time just because of that bothersome feeling.

 

[Bamaman]

Home Depot & Lowes often offer 0% interest for 12 mos. on purchases $299 & more.

I took advantage of both. But I have a hard time remembering to pay monthly. So I just paid them off. I should have taken the 5% discount which would have been equal to about a 9% APR equivalent.

 

[Golden sunsets]

We had planned to purchase our 2020 new vehicle last year for cash, but were offered 0% financing, deferred payments for 90 days, plus a $500 credit to the loan balance. So we took the cash, set it up in a high yield saving account and arranged for an autopay out of the account to the financing arm of the manufacturer. It's a 5 year loan. If the interest rate on the savings account remains .50% for the remaining 4 years, we will make a $1,000. If I could have bought the car for $1,000 less for cash, I would have, but the dealer would not lower the price any further. Seemed Iike a no brainer to us.

We have no other debt.

 

[njhowie]

18 months ago we had our roof replaced. The contractor had a deal through Wells Fargo for 12 months interest free financing on the entire job and we took it. Obviously Wells was looking for folks who would miss a payment or not be able to complete the payoff in 12 months and then they jump the interest rate to 28.99%.

The moment we signed the contract I went on to Wells website, and set up the auto pay for the next 11 months to be certain it would pay off within the terms. No issues whatsoever.

 

[Broland]

18 months ago we had our roof replaced. The contractor had a deal through Wells Fargo for 12 months interest free financing on the entire job and we took it. Obviously Wells was looking for folks who would miss a payment or not be able to complete the payoff in 12 months and then they jump the interest rate to 28.99%.

The moment we signed the contract I went on to Wells website, and set up the auto pay for the next 11 months to be certain it would pay off within the terms. No issues whatsoever.

Great minds think alike!

 

[Jerry1]

As SecondCor521 points out, sometimes the free financing isn’t free. It’s always worth it to dig a bit deeper to be sure. But, if there is free financing, even something as simple as 90 days same as cash, I’ll take it. I won’t jump through any hoops like opening up a new store credit card, though I’ve done that in the past, but if it’s pretty simple/straightforward, which most financing is these days, I’m going to take advantage of it.

Like the OP, me and DW do have a gene that doesn’t like debt and we feel like we should pay it off early, but at zero, there’s just no reason to do that. It’s not like the payment is a burden.

 

[jazz4cash]

We’ve used zero % financing for many many years. It really helped us when we were a young growing family. I used to always ask for a cash discount instead but lately that has not been an option. Just make sure you know the rules, set up autopsy, etc. It does get tempting to just pay the balance in full but it’s free money! I also use the float on my rewards credit cards that I also consider free money. We live in an economy where using credit is cheaper than using cash.

 

[Bigdawg]

we use the 0% for 12,15,18 month credit cards sometimes. While building our house 2.5 years ago we each used a 30K for 18 month card. DW paid for the kitchen. I paid for the bathrooms. Reason being the construction loan people are criminals. I said no way and financed myself. Had almost enough but didn't want to totally deplete the cash fund. Easily paid off the cards with monthly cash flow long before the 18 months were up. I just picked up another 10k limit 0% card for 15 months. Paid for a few things that would have been purchased anyway. Could pay it off today but I'll wait and pay it off at month 14. Probably won't do this again or at least not as a normal practice. Our only other debt=mortgage at 2.74 and DW car at 0%.

 

[Scuba]

We do this for major purchases sometimes. Don’t do it for ongoing costs, but we took advantage of it for our flooring and appliances in our major remodel. As others said, just set it up on autopay to make sure we pay it off on time. I usually pay it off a few weeks before the promotional period expires, just in case there are any glitches with payment.

 

[Amethyst]

We used to take advantage of 0% financing (furniture and jewelry, typically) but then credit card rewards points grew too enticing.

We pay off our CC balances every month, so it is "free money" (I realize CC rebates are built into the price...but it's everybody's price, no matter how they pay).

Would use 0% to buy a car, once the price has been settled. When we bought our car 6 years ago, 0% financing wasn't offered, so we paid cash.

I'm curious how many others utilize "free credit" (0% interest over time) and how you feel about it?

Although I have the means to purchase everything with cash, the allure of 0% is just too enticing! Now I have a sewing machine, home gym, truck and tires on the "free-money-train". I set up automatic payments so it's no burden or overhead on my part ... all automated. My self-rationalization is I get to keep the extra funds earning money in the market.

HOWEVER, having no other debt, this is starting to bug me. I'm actually thinking about just paying it all off so I don't think about it. Any others utilize these 0% promo's and ... does it bug you after a while?

 

[Dtail]

Would only consider it probably for a car purchase.

 

[FLSUnFIRE]

I play the game, I enjoy free money. When I bought my current home I got 0%/5 years for my furnishings (wouldn't give a deal for cash). I'll take it, been earning .4% on the money in the meantime.... peanuts but it's an optimization. I also play the CC game, accepting ~1 offer each year for the sign up bonus and during the 0% period I let the balance grow paying only the minimum. -Probably averaged $5-10K at 0% over the years. Again, only currently getting .4% on the money in my MMSA but it's enough for a meal! With my pending FIRE, I may not qualify for as many offers.



I'm surprised the banks don't blacklist those of use that don't pay interest... I've never paid a dime on consumer debt (other than first auto purchase that I paid off in a year). I don't like debt (even carrying the 0% but get some joy earning interest on free money.)

 

[old medic]

We say we have a 0% mortgage... We are rebuilding an abandoned house we bought at auction, gutted to the studs rebuild... and even though we have the cash on hand, we are buying large supplies on 0% store cards... Just added $3200 for kitchen cabinets to our "Mortgage" over 2 years... Our minimum payment is always at least 10% the balance.
I will caution all that play this game... The interest is figured for the whole term and WILL be owed should you not fulfill your side of the deal... Make the minimum payments, pay on time and pay it off....

 

[mrfeh]

Would only consider it probably for a car purchase.

+1

We had a 0% auto loan 5 years ago. That was our only loan during the last 20 years.

 

[LRDave]

Like others above for cars, we have a 0% loan on our tractor. The manufacturer absolutely would not reduce the price further if paid full in cash. DW's BIL is a bigwig in the dealer network for this tractor manufacturer. Their finance arm is a big and important part of the business model. They want to capture as many buyers in it as possible. The 0% buyer commonly craves a new, bigger, more expensive tractor. Being in the system makes it easy to trade up and the new tractor will not have a 0% loan.

I put the purchase price in a separate Ally saving account and scheduled the auto pay for the 5-year term of the loan. At the end of the loan term, I will get a pleasant surprise. (Maybe enough to pay for a new implement )

 

[jollystomper]

We did it once, when we last replaced our heat pump. It was during a "down" time in tat sector in our area, and all kinds of deals were being offered. We had competing bids and one lowered the price and threw in 0% financing and a few other bennies.

Generally speaking, I tend not to do them. We pay off our credit cards every month, and for me it has become a good "mental" feeling knowing that there is not "debt" I still have to pay, even if it is quite affordable. Of course, the next time I buy a car, I am not going to rule it out if the deal is good .

 

[The Cosmic Avenger]

We first took out a 0% loan many years ago for a home improvement project. We didn't have the cash for it, but were ready to take out a home equity loan. I read the terms very carefully and noted that if even one payment was late, all the interest that WOULD HAVE accrued at the prevailing interest rate would be due! So I was VERY careful to pay it on time, and double-checked that each payment was credited properly.

Then, like Golden sunsets, we were ready to pay cash for a new car in 2017, but after negotiating the price and telling them we were paying cash, the dealership offered us 0% financing for 4 years. I realized that the car's price was very close to the amount remaining on our mortgage, so I paid off the mortgage and took the loan! Our loan payment was less than half of our previous mortgage payment, so we saved much of the rest towards replacing the other car.

 

[Chuckanut]

As I have mentioned before, I find that time spent maximizing cash rewards and the occasional 'bonus' points on a new CC are more profitable than trying to squeeze an extra 0.2% of interest from a CD. Not that I don't watch CD rates. I do.

 

[jazz4cash]

I had a Sears MasterCard that offered me 0% for life plus no fee balance transfers. They had screwed something up, I called to close the account so they offered the deal to retain my business. They approved an increased limit so I loaded that sucker up. Back then we carried balances on several cards. I paid minimum balance on the 0% offer for about 10 yrs! It got to be a PITA watching the balance barely budge for years. They had many unfavorable terms built into the deal. The main one was that new purchases accrued at 18% with no grace period. That pretty much negated the 0% so I never used the card all those years. I finally just paid it off in a lump.

 

[Sunset]

We first took out a 0% loan many years ago for a home improvement project. We didn't have the cash for it, but were ready to take out a home equity loan. I read the terms very carefully and noted that if even one payment was late, all the interest that WOULD HAVE accrued at the prevailing interest rate would be due! So I was VERY careful to pay it on time, and double-checked that each payment was credited properly.

....

I had the same deal for bedroom furniture about 20 yrs ago.
I made sure to pay it off 1 month early in case there was suddenly a "problem" with the final payment.
The whole thing made me nervous and in the end didn't seem worth it to earn 8% on the money at the bank for the 12->18 month period.

 

[pacergal]

We've used 0% deals many times, easy to pay back with auto pay set up from the bank, set up for 11 months to make sure item is paid off before the 12 month timeframe rolls around.

 

[Walt34]

I'm surprised the banks don't blacklist those of use that don't pay interest...

It surprises me a bit too. They do have a term for those of us who don't pay interest - "Deadbeats".

We did take one of those 0% deals when helping FIL fix his house up for sale and had the floors refinished. Paid it off a month ahead like many just to make sure there were no "gotchas" in it.

Then the buggers tried to slip one past me. I got a letter that they were going to charge me $10/year to keep the account open! Um, no. I closed that account pronto, with a not-nasty-but-not-exactly-polite letter delivered certified mail, return receipt requested so there was no arguing about it later.