“12 Months Same as Cash” is a contradiction in terms. 12 months is NOT the same as cash. Cash is the only thing that is cash and only cash has the power of cash. Sure you may not have to pay interest when you buy something on a “same as cash” promotion, but you’re not getting the same deal as if you really had that green paper-looking stuff in your hands to negotiate with. This is a fairly long post, so if you don’t feel like the details, just skip to the bottom and check out the last two paragraphs, where I’ll sum it all up nicely and in a few words.
Almost all of these financing gimmicks that offer you a “__ Days Same as Cash” deal work the same. If you pay the entire balance in full before the promotion expires and are never late on a payment during that time period, you win. Congratulations, you played and beat the system…or something like that. Sad Fact: Almost 80% of “same as cash” promotions aren’t paid off by the time the promotion expires. “So what?” you ask. Well, although it is now a bit more plainly stated than it used to be, if you don’t pay that debt off before the promotion ends (or if you happen to be even a single day late on a payment), you’ll get hit with every penny of interest that has been building since the date of your purchase. Let me put it another way. If you don’t pay off your promotional balance before the magic date of its expiration, you’re going to get hit with a HUGE interest charge.
I used to work for a credit card company that offered an everyday same as cash promotion on purchases over $299. So, on a very regular basis I was calling someone who was past due on a bill and was now enduring a late fee, accrued interest charges and an unpleasant dose of financial reality. You know what, probably 1/3 of those people didn’t have a clue how the promotion worked. Most never intended to pay it off early (and couldn’t afford to) but thought this promotion would give them a reprieve from interest charges and be a little bonus for using their store credit card.
Thankfully it is a bit more clear than it was in those days, but even with the extremely clear and up-front language used by stores and credit card companies these days (thanks to tighter regulations on such matters), it still requires someone to pay close attention. Here’s the way it is worded by Home Depot on their website,
Interest will be charged to your account from the purchase date if the purchase balance (including premiums for optional credit insurance) is not paid in full within 12 months or if you make a late payment.
Lowes puts it a little differently:
Interest will be charged to your account from the purchase date if the promotional purchase is not paid in full within 6 months. Minimum monthly payments required. No interest will be assessed on the promotional purchase if you pay the promotional purchase in full within 6 months from the purchase date. If you do not, interest will be assessed on the promotional purchase from the purchase date.
But wait a second, that’s pretty easy to understand, right? Let’s keep reading (fine print this time):
Depending on purchase amount, promotion length and payment allocation, the required minimum monthly payment may or may not pay off purchase by end of promotional period. Some or all of the minimum payment based on the promotional balance may be applied to other account balances. Regular account terms apply to non-promotional purchases and, after promotion ends, to promotional purchases. For new accounts: Standard APR is 24.99%. Minimum interest charge is $1.00. Existing cardholders should see their credit card agreement for their applicable terms. Only one credit related promotional offer can be applied to any one item on a sales receipt. The “purchase date” for an item is the date it is charged to your account. Your account will be charged immediately for an item, unless otherwise provided on your order sales receipt.
Huh? It sure is a good thing I took the time to read all that and completely understand before signing on a massive purchase at my local home improvement store. Yeah, right. I’m sure that gets carefully read at the time of purchase.
I’m not picking on Lowes, Home Depot, or any other retailer. This is not a post about “evil corporations and all their greed.” This is a post about using good common sense in your purchases – even on the big stuff. When you play with credit offers, you’re playing a dangerous game. The huge corporations and their marketing and legal departments are much more prepared to take you on than you are to take on them. They have calculated it is by far in their best interest to offer these “promotions” knowing most of the people who sign up for them will end up no better off than if they hadn’t (and often worse).
Be honest, how many of you skipped almost everything I wrote above after the sentence that told you it was okay to jump down to this last paragraph? That’s what we do as consumers. We see the HUGE PRINT that says 12 MONTHS SAME AS CASH and skip over everything until the part where our signature is required. We sign the little box and go out smiling. That’s our problem. It isn’t the retailer’s problem. We want what we want and we want it now. We don’t want to wait and we want any opportunity the retailer will offer to get a “deal.” The reality is this: a deal is when you get something not every single person in society can walk in off the street and obtain. A deal is where you have brought your negotiating skills, a level head and some cold hard cash into the arrangement and walk out with a better situation than the average person would have.
12 months is never the same as cash. If I pay cash up front, I’ll get a better deal every single time than you will with your perfect FICO score. Unless it is a true emergency where your emergency fund won’t cover it, walk into a situation with cash and a willingness to ask for a better deal than what is offered to the masses.