"No Interest Till July 2007" - what's the catch?

So I’m considering the July 4 furniture sales, as I’m (given a good inspection) buying a house pretty soon. If the sales are sufficiently good, I might buy early. I haven’t got a whole lot of loose cash lying around, but I could pay off any furniture in a few months (certainly before 2007).

So, they’re all screaming “No interest until 2007!” I figure that if you haven’t paid for it yet when 2007 comes around you get hit with huge fees and interest, but what if you just want a few extra months to pay for your furniture? Is there a catch? Some sort of early payment penalty? What’s the Straight Dope?

Generally, they don’t require you to pay any interest in the interim, but when it gets to July 2007 they will charge you interest from the date of purchase. the catch is that the meter is still running, even while you’re not required to pay. If you do pay in full before that date, you may or may not have to pay any interest, See this article from Kipplinger for details on how these promotions work.

Generally they are a good deal.
The thing they count on though are people

  1. Not paying it off by 2007 and hitting them with the interest.
  2. If it’s “no interest till 2007 with payments” them making a late payment and getting hit with late fees and interest.

The other thing to note is that these places will either run “sale” prices or run “no interest till 2007” deals. They don’t run them togther however. So don’t expect to get their best prices while they run the no interest deals.

Sometimes interest and non-payment fees will accrue and be on your statement, but if you pay it off on time that will be elimiated, if you don’t it will just go on. Some people have had problems waiting till the last month then paying it off, just to find out that their payment took about 3 weeks to get through the mail and have arrived a few days late (and hence owing all the fees and interest) If you do wait till the last month, I suggest calling them up and telling them you want to send your payment via cert. mail and request the address to send such a payment to.

So, if they don’t run the best sale prices when they’re running their No Interest Extravaganza, when do they run their best prices? When’s the best time to get a good deal on furniture? I probably won’t need it for a few months, but when I do need it I won’t have a table at all unless I buy one.

I bought a sofa this way.

No catch; they said “no interest for 18 months,” I paid it off (in three big chunks) before the 18 months expired, and everyone was happy.

If you have cash in hand, you can sometimes negotiate a lower price than if you finance. We did this with a couch purchase a few years ago, getting them to knock 10-15% (I forget exactly) off the price and waive the $60 delivery charge by agreeing to pay cash.

Otherwise, the 0% financing is fine so long as you make sure you pay it off completely by the end of the term. If you owe even a dollar at the end you’ll have to pay the interest on the full thing from the beginning.

**Don’t buy anything big until after you close. ** I’ve known more than a few people that have had an offer to buy a house accepted, then ran out and bought furniture, home theater gear, etc. When the lender runs a final credit report, they find your FICO score has gone down 25 points and reject your loan application.

The price is the catch. Others have said this but it is worth emphasising. Any store that I have ever bought anything from that offered this sort of deal has given me a much better price for cash when asked. So the finance cost to them of this sort of deal is built into the floor price.

Oh, I hadn’t thought about that. My debt-to-income ratio is pretty good, and I wasn’t going to borrow for anything but furniture (and that not even necessarily) but I hadn’t considered the fact that they’re not done pulling my credit on this.

So I guess I’ll just save up and do without until I can. I read somewhere yesterday that August and September are the best times to buy furniture - is that true? Is there a reason?

Well everyone except the company that gave you an interest free loan.

Be sure to keep ALL your payment receipts (pay by check and keep the copies).

A co-worker bought a computer from Best Buy on a plan like this. He paid on time every month until the computer was paid off. A month after the last payment, he got a bill for all the interest. It took him about 3 weeks to get them to retract the bill.