Sounds great right?

What are these deals, anyway? Are they legitimate or some type of scam? When should people consider them? What should they look out for?

Typically these retail incentives are advertisements designed to lure buyers into the store. It’s an incentive to get people to buy things NOW that they can’t afford.  These deals aren’t necessarily a scam, but it convinces people that they can have these items or luxuries without actually paying for them. The deals are often set up in such a way that you buy the merchandise and have six months or a year, or sometimes even longer, in which you don’t have to make a payment. Or you pay no interest on your payments until a set date. Depending on how the deal is structured, if you pay the entire purchase off under that contract period, you may not have to pay any interest. If you don’t pay it off, the payments begin and the entire amount of accrued interest is added to the balance- immediately!

Words of Caution

If these types of marketing campaigns are legitimate, what should the average consumer look out for?

First, find out if you qualify for this item, not just now but later as well, when billing the starts. If you can’t afford it now, you shouldn’t take part in these kinds of deals. The debt doesn’t go away, you’re just delaying it, and there is no guarantee what you financial situation will be in a year from now. A lot of times people are using these no-interest, “buy now pay later deals” for things they don’t have to have. You need to decide if it’s a want or a need. If it’s a want, it can wait. You should only use this type of situation when it is an absolute need.

Secondly, understand what you’re getting into.  You have to understand all the rules going into the deal. Make sure to read the fine print in the buyers contract and look for the answers to these questions:

Do you need to make payments along the way?

When, exactly, are payments due?

What penalties are you likely to have to pay if you don’t follow the contract precisely?

Are there additional handling fees that have to be paid to defer payments?

Make sure your aware of any charges you may incur.

Thirdly, make sure the deal applies to the product you’re interested in. You should compare prices and quality of the merchandise with others and make sure your getting the best possible price– the deferred payment deals are NOT always the lowest price.

Oh What a Deal!

Not all of these kinds of incentives are scams, in some cases, these can be terrific deals.

First off make sure this is the item that you really want. If you want it, take a look and see what your financial circumstance is going to be. If its going to be a positive, then you might want to buy this item. If you as a consumer have good credit, cash in the bank and control of your finances, it might be a good route to take. If you’re a disciplined consumer it’s an excellent idea. For example, you might get a thousand dollar refrigerator, and if it’s paid off in a year, you don’t have to pay any finance charges. Tell yourself that your going to pay a hundred dollars faithfully for 10 months before the end of the year.

Certainly it’s a great thing to be able to do, but you’ve got to be

disciplined.

Prioritize Your Purchases

That plasma TV would look pretty great hanging on your wall, Wouldn’t it? Nothing wrong with wanting it, except its just as expensive as a one-week vacation for a family of four to Disney World, including airfare. The local appliance broker is offering a deal, though. Buy it now and for the first year, pay no interest.

Is it worth it?

If this TV costs $7,000 and you can’t afford a $7,000 TV, then maybe this isn’t a deal you should even consider. Buy the 32 inch regular TV instead. But maybe you’re expecting a year-end bonus from your job that will be about $4,000. You could make the interest-free payments until then, and pay off the TV when the bonus comes in. Consumers should keep in mind that credit costs money. While delayed payment plans allow you to purchase what you need or want when you don’t have the cash upfront, you usually end up paying more for the item when you finance it over time.

Use a Pragmatic Approach

Think of yourself as a “small business”. What is the rational way to approach this transaction? View this transaction the same way you would something in your job. With these particular deals, you really have to look at them with that kind of hard-eyed focus, rationally. A careful inspection of your balance sheet, displaying your assets and liabilities, can help you make a decision about whether that purchase is good or bad for you.