Q: What does same as cash financing mean? I always see it advertised by furniture and mattress stores but have no clue as to its definition.
A: Watch out because this is one of the biggest traps out there.
In addition to furniture, you will often see 90 days same as cash for auto repairs, tires, electronics and appliances. Sometimes it’s even for 6 months. Maybe even 12 or 18 months.
Now we all know cash is a good thing, so when you hear that it’s the “same” that sounds like a good think, right? Well it’s not because it’s different than cash.
When you pay cash for something, you obviously can’t get charged any interest. But with these types of financing promotions, you can.
Real definition: 90 days with possible retroactive interest!
In order for it to be the “same as cash” (and hence, no interest charges) you need to pay it off during the 60 days (or 6 months or whatever the time period is).
Example: Let’s say you use Best Buy’s same as cash financing. The offer is for 12 months and you use to buy a new TV, Blu-Ray player, and some other toys. Your grand total is $1,500.
11 months later, you’ve paid off $1,200, which leaves you with a remaining debt of $300.
“It’s only $300” you think. “I can’t pay it off before the 12 months, but paying interest on such a small amount won’t be too painful, right?”
Even if you paid off $1,499 of the $1,500 during the 12 months, you’re going to be hit with retroactive interest for not paying the full thing off.
And here’s the worst part – the retroactive interest is charged on the entire purchase price, not just the remaining balance.
At a 27.99% interest rate, that equals about $484.49 of finance charges over a 12 month period.
So that $1,500 purchase from ends up costing you almost $2,000 instead. It would be even worse if you used Best Buy’s 18 month financing instead of 12.
As you see this is a huge trap. Even if you think you will have no problem paying it off in time, as we all know life happens. Between now and then you could be hit with an unexpected car repair, medical expense, job loss, or any number of other things. Why risk it?
Normal credit cards don’t do this
Most store credit cards that offer “no interest” are actually offering you same as cash financing.
That is completely different from major bank credit cards – when they advertise 0% for X months, that’s what you get. Even if you don’t pay it off in time, there will be no charge for back interest. They give you true 0%.
So if you want to buy something and finance it, then the same as cash loans you get from the store should be your last resort. First, see if you can qualify for a regular credit card that gives a 0% intro APR on purchases.
Don’t think you will qualify for a bank-issued credit card? Then try out this form from Capital One which will tell you if you are pre-selected for any cards based on your credit score.