Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I always felt that there has to be a catch when I am offered years to pay for something with no interest, so people is there a catch beyond if you miss a payment or if a payment gets lost in the mail, then you then owe a hefty interest on top of the loan?
If there is no catch then wouldn't it be better for those companies who offer zero interest for years, to offer discounts for cash?
I always felt that there has to be a catch when I am offered years to pay for something with no interest, so people is there a catch beyond if you miss a payment or if a payment gets lost in the mail, then you then owe a hefty interest on top of the loan?
If there is no catch then wouldn't it be better for those companies who offer zero interest for years, to offer discounts for cash?
One of the biggest gotcha's is that many (most?) of the zero percent deals (at least with credit cards) have a provision that if the bill isn't paid in full by the end of the zero interest period, all of the previously foregone interest retroactively accrues back to the original purchase date. The buyer is then liable for all of it, at a hefty interest rate.
If you are good at managing your money, these deals can be a good thing. But the credit card companies keep offering them because there are a lot of people out there that can't manage their money, and they get caught in this trap.
If you have a previous balance on the card before you take advantage of a zero percent deal here is what they hope happens.
If you have an existing balance and pay for the zero percent item they are hoping you still have a balance on the card. Since the money you send in goes for the oldest charges first you will not have paid off that zero percent item in full unknowingly.
Now they gotcha for all the interest since day 1 as you didn't pay n full.
The catch is always if you go beyond that 0% deal.
If you are good about paying off then it's a good deal because you keep your money working for you that much longer.
Be very careful when agreeing to this when they start offering the extended warranties and a credit protection service. Keep all your paperworkyou sign. I went to a national store when I needed a new comp fast for work. I agreed to it knowing I would have it paid off in about 3 months and I had 18 months. I turned down all the other junk they tried to sell me as I always do. I noticed on my first bill a charge for around $7 and called the store and they said it was for a credit protection service I agreed to when I bought the comp. I said I never agreed to that and remember initalizing the no line. Well then I had to call the company in India. I called the company and they told me they had the paper and I signed that I wanted it. I told them I had my original copy and they could refund my money and stop charging me or I would be happy to contact the state attorney general in my state to let them know what their company and the store I bought the comp from is up to. Before the guy from India hung up he told me to be careful what I sign in the future. I was in the store a few years later with a friend and told the salesman what happened and he admitted it happens and he hates it when salespeople do that. He said most people don't keep copies of everything. It's not the Best store to shop at.
One of the biggest gotcha's is that many (most?) of the zero percent deals (at least with credit cards) have a provision that if the bill isn't paid in full by the end of the zero interest period, all of the previously foregone interest retroactively accrues back to the original purchase date. The buyer is then liable for all of it, at a hefty interest rate.
This is absolutley correct. The "catch" is that the bill must be paid in full before the interest free period ends, and they know that most people either don't understand this or won't pay it off in time and end up paying all the interest in the end anyway.
If you have an existing balance and pay for the zero percent item they are hoping you still have a balance on the card. Since the money you send in goes for the oldest charges first you will not have paid off that zero percent item in full unknowingly.
Now they gotcha for all the interest since day 1 as you didn't pay n full.
Excellent point Mathjak. People need to understand all of the shady tactics these companies use to scam you.
Location: 23.7 million to 162 million miles North of Venus
23,645 posts, read 12,561,414 times
Reputation: 10494
Quote:
Originally Posted by TaxPhd
One of the biggest gotcha's is that many (most?) of the zero percent deals (at least with credit cards) have a provision that if the bill isn't paid in full by the end of the zero interest period, all of the previously foregone interest retroactively accrues back to the original purchase date. The buyer is then liable for all of it, at a hefty interest rate.
That is typical with store cards, not so much with major credit cards. The store card creditors don't hide the info that explains the promo terms, it's up to the consumer to read it and meet the terms they agreed to when taking advantage of the 0% store promos.
Quote:
Originally Posted by mathjak107
If you have a previous balance on the card before you take advantage of a zero percent deal here is what they hope happens.
If you have an existing balance and pay for the zero percent item they are hoping you still have a balance on the card. Since the money you send in goes for the oldest charges first you will not have paid off that zero percent item in full unknowingly.
Now they gotcha for all the interest since day 1 as you didn't pay n full.
Not since the Card Act was enacted....
SEC. 104. APPLICATION OF CARD PAYMENTS.
(b) APPLICATION OF PAYMENTS
(1) IN GENERAL
.—Upon receipt of a payment from a card-
holder, the card issuer shall apply amounts in excess of the
minimum payment amount first to the card balance bearing
the highest rate of interest, and then to each successive balance
bearing the next highest rate of interest, until the payment
is exhausted.
(2) CLARIFICATION RELATING TO CERTAIN DEFERRED INTEREST ARRANGEMENTS
.—A creditor shall allocate the entire
amount paid by the consumer in excess of the minimum pay-
ment amount to a balance on which interest is deferred during
the last 2 billing cycles immediately preceding the expiration
of the period during which interest is deferred.
Again, it's up to the card holder to read the fine print. And, if they are using a card, store or major card, for a 0% promo, then, during that promo period the consumer should refrain from using the card for other purchases until the promo purchase is fully paid off.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
