Arbitrage Store Financing Deals

February 21, 2007 at 9:00 am · Filed under Debt, Savings, Shopping

Liz Pulliam Weston at MSN Money recently asked her readers for money hacks. She picked 12 cool money tricks to publish. My favorite? Getting stores to give you interest-free loans:

Warning: This is an expert hack, recommended only for folks who have good money management skills. I’ll let a Your Money message board poster with the handle of “sneakers” explain how it works:

“Whenever I buy a big ticket item, I make sure I have the cash to pay for it. Then I wait for store financing offers — same-as-cash or deferred interest for an extended period. I opt for the financing, put the cash in a (certificate of deposit) that matures just before the end of the promotional period, and pay it off before the deferred interest becomes due. It’s like a free loan from the stores and I can earn interest while I enjoy the item!”

Obviously, this hack works ONLY if you keep your mitts off the invested money and if you pay the bill before it comes due; otherwise, you could pay a truckload of finance charges.

This is beyond my skill level at the moment, but I admire the guts it takes!


7 Comments »

  1. David said,

    February 21, 2007 @ 12:57 pm

    I did this once and it wasn’t worth it. I had bought a new TV and I had the cash (in a decent interest money market account) and went for the “no interest for 12 months” deal. You still had to make monthly payments on the principal, but no interest. I figured I would make about $50 in float. The catch on this was that if you miss a payment or were late, they charged you interest retroactively at some insane rate (24%, if I recall). Every month I stressed making sure I sent it in time and would have moments of being fear-stricken trying to remember if I had sent it in for that month.

    The stress and the burden of being under that obligation were not near offset by the float I got from the money.

  2. Mia said,

    February 22, 2007 @ 8:46 am

    I’ve done this with Home Depot’s deferred interest offers (6-12 months) - no monthly payments required.

  3. Brian Smith said,

    March 4, 2007 @ 9:21 am

    Bear in mind, though, that the cost of these items has been raised somewhat so that the store STILL makes money even with the “interest-free” period built in. Consider buying used items instead, especially for electronics. The method above is smart if you absolutely must have that particular item, but remember the store is quite happy to give you that 12 months interest free because their price includes a profit even with that factored in. Shop around or buy second hand if you can.

  4. Anna Matetic said,

    March 5, 2007 @ 10:10 am

    I have done this as well. But make sure you read the fine print! Some zero interest offers require a minimum monthly payment. If you don’t make the minimum or are late with payment, the offer is voided and the interest is added from the beginning of purchase.

  5. David Carroll said,

    September 4, 2007 @ 9:09 am

    Yea, I did this with a furniture purchase from Dillards. When I sent the last payment of 700 dollars they double charged me for 1400. When I wasn’t able to get them to take off this charge after two and a half months I had to resort to calling the bank and filing a dispute since there is a 90 day dispute limit at the bank level. The bank could only dispute the full amount, so they did so. Then Dillards back charged me for the full amount + all of the 24 percent interest and threw me to a collector even though I mailed a check (certified) for the non-interest portion immediately.

    Retailers make a HUGE profit off of financing, and often screw up accounts, shred payments, or just hold them until they are late so that they can nail you with huge interest and late payments. They know they are screwing you, and they know you can’t sue them because they have that all nailed down in the snail print. They also know that you will pay a few hundred dollars in ransom to keep from having your credit score trashed to the point you get nailed for tens of thousands on your next mortgage. In store credit companies are all a bunch of piranha, and I’m not swimming in their pond any more.

  6. Todd Buxton said,

    September 18, 2007 @ 8:50 am

    Keep in mind that most of these promotions include applying for a new consumer credit card. Having too many of these accounts will hurt your credit score and could cost you more in the long run on big ticket items like car loans and mortgages.

  7. Jeff H said,

    January 13, 2008 @ 12:00 pm

    Todd is on track. You have to be really careful with these as they may hit your credit report. Too many inquires will lower your credit rating, so if you have debts elsewhere, the amount you earn on interest could easily be offset.

    Recently, had a friend that got hit with this. He bought a new house and purchased about $5000 in new furniture on a 18 month 0% interest deal. About a month later he did something similar for new appliances. The then suddenly saw a jump in his credit card rates. The multiple inquires and added debt lowered his credit score across a threshold. As a result, he ended up losing money as he had about 10K in consumer debt.

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