My goal for RTM Solutions (the header I do all things outside of the blog under) is for people to understand personal finance without having to (1) have a financial degree, (2) read 300 pages on the philosophy of money, and (3) listen to boring lectures on high-level concepts that whiz past your head.
Today, we are going to look at “90 Days same as Cash” and whether or not it’s a good option for people buying products.
Let’s first look at the business owners’ perspective. Why would someone offer you three months to pay something off at 0% interest? Is it out of the kindness of their own heart? Is it because they want people to have nice things without paying interest?
Some estimates of this “product” (loose term), is that 80% of the people who apply for a 90 days same as cash purchase, do not make pay off the purchase before the 90 days is up. This leads to them paying for interest in both directions. That is to say, they pay for the previous months interest, as well as all the future interest until the purchase is paid in full.
Let’s look at an example
Bought: $4,000 Dining Room Set, 90 Days SAC
At 24% APR post 90 days, if you take one full year to pay it off you’re looking at nearly an extra $1,000 for that dining room set. If you take three years? Well, that dining room set will cost you well over $6,000!
Sadly, many people don’t pay these types of things off quickly because they look at whether or not they can afford the payment rather than the product. Anyone can afford a payment of $50/mo, but what goes along with that? Interest, liabilities, and the stress of having to make another payment every month now.
What you need to ask yourself is: Can I afford this? If the answer is no, then you ask: What can I do to afford this?
If you can’t pay cash, in full, for a product, you don’t need it. Now I know some of you are saying: “But Rob, I do that all of the time and it works great!”
If that’s true, awesome. But you’re in the 20% minority. The reason companies offer “tools” like this is so they can earn more money on their products. Their business model is set up to hope that you don’t make your payments in 90 days.
That is why you will have salesman ask you to hold on to you money and just finance it over 90 days; after all, it’s the same, right? Wrong.
They are hoping that you’ll slip up and they will get interest payments along with the actual purchase price of the product.
Don’t fall for this scam. 90 Days Same as Cash is a garbage product and it’s used by companies who want people to fail. If you don’t have cash, don’t buy it. Save up, pay cash, and you’ll probably even get a discount.
Rather than paying $4,000 for that dining room table, you may only pay $3,500. Beats the hell out of paying $6,000+, right?
Last thought here. Let’s imagine that I give you $4,000 cash, right now. Is that the same thing as me giving you $4,000 over the next 90 days…
Nope. You would hope that I give you the $4,000, but who knows?
Have stories about “same as cash” scams? Shoot them down in the comments and as always, thanks for following along.