We’ve all seen the promotions, especially popular with furniture stores: 0% interest for one or two years – just make a minimum monthly payment. If you have decent credit, you qualify and this can be very enticing if you are a bit short on cash but really do need some furniture.
My youngest daughter and her husband found themselves in that situation a year ago when their bed was giving them both back aches, but money was tight with twins and a toddler, all under the age of 3. So they took advantage of a promotion to purchase a good quality bed from a reputable mattress store. The promotion offered 0% interest for one year and a minimum monthly payment of just $50. Sounded great! They were able to purchase a great bed that they otherwise couldn’t afford.
Fast forward to last week when my daughter calls me and asked me to look at her recent statement because it just made no sense to her. “Last month we owed a balance of $1400,” she said. “How can the interest charged for this month be $1500 and our new balance be $2900?”
So here is the dirty little trick that should be illegal, in my book. In reading the fine print it turns out that zero percent interest only applies if the entire balance is paid-off during the promotional period of one year. On the anniversary of the purchase date, all deferred interest for the previous year is added to the balance, in this case at an interest rate of 29.99%!!!
Luckily my daughter actually read the statement upon receipt and was able to pay-off the $1400 balance just days before the 1 year anniversary of the purchase, but what if she had just made the new higher monthly payment without giving it much thought? Even if she would have caught it next month, she would have been out of luck and obligated to pay all of that deferred interest because the promotional period had ended.
So read the fine print! Does your contract mean that you really do have a promotional period where you pay 0% interest and then you start to pay interest on the remaining balance, or does it mean that after the promotional period you will have to start paying all the deferred interest on the original balance?
If this isn’t a deceptive business practice, I don’t know what is!
If you’re ready for some straight talk and excellent service buying or selling your San Diego County home, just give me a call for a no-obligation chat!
Comments(22)