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|| SportsShooter.com: Member Message Board
OT: Jedi Banker 0% Interest Financing Mind Games
Michael Fischer, Photographer
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Spencer | Ia | USA | Posted: 12:38 AM on 08.07.11 |
->> 0% financing – the siren song of consumer debt for the last two decades, looked like it had met it’s Waterloo when the feds forced the banking industry to adapt new rules last year.
Leave it to some fresh young faced finance MBAs to come up with a new twist where even if you pay on time, and make complete payments, you’ll still end up pay interest – lots of it.
Here’s how this legal scam works:
You’ve no doubt received the 0% blank checks from your credit card provider. Use them for whatever – that vacation, that unplanned appliance replacement a new digital camera body – and take 12 months to pay with zero percent interest. What could be easier?
It’s only when you get your bill the next month and see interest on it, or – heaven forbid; read the fine print – that you may discover how they do it – legally. What they do instead of assessing interest on the purchase you financed at 0% is to charge you interest on any other charges made during the month. As a result, paying those charges off on time within the grace period will still get you interest charges.
Keep in mind that if you do this via a balance transfer from another credit card account, there’s usually an additional 2-3% charge on the transfer balance.
IF you have to finance this way, the easiest way to get around the additional charges is to finance the 0% item and nothing else on the credit card while you pay the item off. Keep in mind that if you don't pay on time and the account goes into default status, the interest rate is probably somewhere in the 29.9% range.
Of course, the best way to get 0% is to pay cash and ask for a 1-2% additional discount.
Hope this helps.
Michael |
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Chuck Liddy, Photographer
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Durham | NC | USA | Posted: 2:23 AM on 08.07.11 |
| ->> I tear those checks up every time I get them. you're better off dealing with a loan shark....... |
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Chuck Steenburgh, Photographer
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Lexington | VA | USA | Posted: 5:32 AM on 08.07.11 |
| ->> Or choose a decent bank or credit union that doesn't take every chance they get to screw you, but is content to make money the old-fashioned way by earning it. Plenty of them out there and you can still get your 0%. |
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Bradly J. Boner, Photographer, Photo Editor
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Jackson | WY | USA | Posted: 1:37 PM on 08.07.11 |
| ->> @Chuck S. - If or when you find a "decent bank or credit union that doesn't take every chance they get to screw you," please do let us know. I have yet to find one. |
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Dominick Reuter, Photographer
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Cambridge | MA | USA | Posted: 2:08 PM on 08.07.11 |
->> I dealt with this once, fortunately on a fairly small amount.
It's nothing new, really. Basically each transaction type has a different interest rate on your credit account.
As you carry a balance and add to that balance, the final interest charged each month is weighted according to the various amounts and rates you pay.
The trick is what happens when you try to pay that down. Contrary to what one might expect, you do not pay off the charges in the order they were incurred, but rather any payment you make is automatically applied to the lowest-interest pile of debt in your total.
If you make an emergency withdrawal of cash -- say $200, charged at the highest rate in the schedule, like 30-40% -- that amount rises like oil to the top of whatever debt you have on the card, furthest away from the drain.
So you make that emergency withdrawal and promptly pay back the amount when the next check comes in, and lo and behold, your interest rate on your statement is out of the park.
If in the intervening time you do a low- or no-interest balance transfer, that sinks right to the bottom, putting more payments between you and the interest rate you were expecting when you opened the card.
The only way to get back to the rates you signed up for is to completely zero out your balance and let it sit for a while while everything settles down.
Learning this the hard way sucks big time, but knowing how it works can help make wiser use of the liquidity that credit can offer. Using the features of online banking to stay on top of your account activity and interest rates can give you a good advantage to steer clear of the pitfalls the banks are guiding us into.
****** This is anecdotal experience ONLY, from a PHOTOGRAPHER. ANY decisions should NOT be based on what you read on SPORTSSHOOTER, but through conversations with a reputable FINANCIAL ADVISOR ********** |
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Simon Wheeler, Photo Editor, Photographer
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Ithaca | NY | USA | Posted: 10:24 PM on 08.07.11 |
| ->> Recently I was offered one of these 0% checks by my credit card issuing bank without the 3% up front fee for the transaction. I thought great, I can finally take advantage of the 0% check. Fortunately before I used it I had a very detailed conversation with their rep on the phone. After almost 30 minutes and trying to figure out how to coordinate it with my current autopay of the full balance on the due date every month the rep told me there was no way to use the 0% check without paying interest on something else. These schemes are just a way to trick customers into a tangled web of interest and fees. |
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