Why Buffett Would Hate Nebraska Furniture Mart Credit Card

The NFM credit card offers a “sucker’s deal” for financing that is contrary to Buffett’s own advice.

NFM credit card with no circleYou need to be warned: this does NOT operate like a regular credit card. The 0% promotions use sneaky “deferred interest” which I will explain in a moment.

Over 30 years ago (in 1983) Warren Buffett’s company, Berkshire Hathaway, purchased Nebraska Furniture Mart. Do they have great products? Yes. Are their prices competitive? Yes. Is their credit card a good deal? Definitely not!!!

How it really works

Whether you’re buying bedroom furniture, appliances, or anything in-between, you can use the Nebraska Furniture Mart credit card to pay. The 0% financing offers are usually something along the lines of this…

financing incentive on Nebraska Furniture website

Don’t be confused because this is NOT the same as getting 0% for 20 months. With their card, what you are getting is “no interest if paid in full.” That means you are required to pay 100% in full during the promotional period. If you don’t, you will owe interest charges retroactively on the full purchase price.

On the bottom of the application and advertising they will describe this practice:

when interest is charged

0% from NFM versus normal credit cards?

Of course Buffett is not a fan of debt, but that’s not the problem with Nebraska Furniture Mart financing options.

Although rare, even Buffett himself has used debt strategically. Back in ’73 he saw the market was cheap, so he borrowed $20 million in order to buy up more stocks. However when he borrowed money he stuck by these two important rules:

Rule #1: The financing had to be cheap (low rate)
Rule #2: The financing had to be on a fixed-rate basis (so it would stay cheap)

The credit card account at NFM goes against these rules!

For starters, it’s not a low rate. The application lists an 18% APR and you will eventually be paying that from day 1 of your purchase if you aren’t able to pay off every penny before the 0% period ends. And I think most people would agree an 18% interest rate isn’t exactly cheap or low.

Secondly, it’s not on a fixed-rate basis! Jumping from 0% to 18% is far from being a fixed rate. Yes, it’s true that happens with every credit card that has a 0% intro APR, but the difference with Nebraska Furniture Mart is that they’re slapping you with the 18% interest retroactive going back to day 1, in the event you still owe money after the 20 months. Keep in mind that retroactive interest will be on the whole purchase price you paid, not just the fraction you still owe.

18% rate

If Warren Buffett was forced to buy furniture on credit, I can’t imagine he would choose the store card over a regular card. Why would he – or anyone else for that matter – want to sign up for a 0% retroactive interest plan, when normal bank cards with 0% don’t do that? If you’re going to take on debt, it only wise to do it at the absolute best financing terms available.

Before using NFM’s card I would recommend you check out these other bank cards (and if you already have a NFM card with debt on it, use these offers to transfer the balance before your 0% period ends to avoid retroactive finance charges).

Check out my favorite 0% card offers of 2013

Another advantage you will have with a regular bank card is that most will be earning you cash back or some other form of rewards. On purchases of furniture, TVs, and other big ticket items the ability to get 1% to 5% cash back can equal some serious money in your pocket.

This article was written or last updated May 2013

The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.

I have had my NFM account for about 23 years and rarely pay over $10 in interest a year. Clearly this is an attempt to push people to get cards through sponsors.

Let me tell you what the NFM card does. 1, your minimum payment is about 4% of your balance. This helps to ensure that if you do not pay the balance in full on time, you will not owe more than you started out with when you get to the end. 2. the minimum payment decreases until the approximately 4% of the balance reaches the minimum, which I believe is $15.00, 3 as previously stated, the are upfront about the promotion being based on balance paid in full; 4 and most importantly, they apply payments in the way that is most likely to save you money: 1st to any promotional balance that is not on track to be paid on time to avoid the accrued interest being applied, 2nd to any interest bearing balance, and then to the promotional balances beginning with the ones that will expire first. They act in the interest of the consumer.
While bank cards may not have the “if paid in full” clause, they usually apply payments to the none-interest bearing balance first, so if you carry a balance other than the promotional balance and only make minimum payments, nothing goes to the interest bearing balance. Amounts paid over the minimum may be applied to promotional or standard or a mixture of the balances as determined by the card.

NFM is VERY transparent.

I AGREE WITH ZR…1st blog…NFM are a scam….they promote years of intrest free, but dont allow u to make the equal payments on tje whole loan….they make u pay it in less time than the time they promoting..lol…they are thiefs…fool me once once, but neeever again….cheaters!

As for the rest of the comments…you are privileged cry babies that don’t live on a budget like most of Americans. You have daddy and mommy to bail you out like always….cheaters! Lol

In fact NFM credit card and promotions are not your usual promotions. For instance, we did their 60 months 0% financing deal recently. One would think that what this means is your total balance divided by 60; right. But what NFM did was that they put a small conditions (which was not advertised properly) that one has to make a min. payment of 4% every month to stay out of interest of 18%. What this means? If you spend 15K buying home furniture; decorating your new home; you wont’ be making 15,000/60 = 250. Instead you have to pay at least 600 first month; then your new balance is (15000 – 600 ). So your second months payment is 4% of new balance or 576. This is a sneaky way of cheating customers. I told their billing department that they can fool the customer once; but they won’t be able to do it again.

I disagree. They are very open about their policy of 0% until the promo period ends. We use this card every time we want new furniture like the CFO said earlier – we’d rather make interest in our savings and pay it off slowly.

If you can’t afford to make payments on furniture for a minimum of 1 year to avoid interest, then why are you buying new furniture? You’re living outside of your means and should be looking for used furniture instead.

It’s not a secret that it’s 0% only for the time listed (18-36 months) and that interest will be charged at the end of that time.
This is more a case of you not reading thoroughly.

When shopping at NFM with the 0% do this: Add up your total purchases; subtract 1 month from your interest free period, the divide your total by the number of months, then pay that every month. Your card will be paid off 1 month before interest is charged, every time.

Actually, I am a CFO and I use their card all the time. I pay off the balance before the 0% period ends and I pay NO interest. As long as you do this, it is “free” money, i.e. no interest. I would rather make interest off my money in the bank during that time than take it out of my accounts and miss the interest income so that I could pay cash for the purchase. So I disagree with your blog post. It IS a good deal if used correctly.

Holy cow! You must be really interested in sparking conspiracy theories from nothing. It DOES NOT get any more straightforward than this. IF you buy a $800 sofa you get 6 months to pay it off; yes that’s at 0% interest.
That’s at $133.33 a month. There’s no secret and they say it out blatantly. Minimum payment of $25 required.
Read the contractual agreements in BIG FONT.
You’re doing nothing but telling the people who cant afford anything and go buy things on credit that it’s not THEIR fault but the bank/creditor who’s lending is at fault. Really?

Pay it off within the period and its 0%… it’s not sneaky at all. It is one of the best things that can happen to a mid 20’s person trying to get on their feet and furnish their first place.

Actually this is a pretty good card. I work for a bank that finances credit cards, which do the exact same thing. But the interest is anywhere from 24.99-26.99, never less. And as long as you pay it off by the date they give you, you won’t pay any interest.

so once you get your credit card and say you want to buy a apple mac air, could you pay every month or do you have to pay all at once. If you can pay every month how much would you have to pay for starting.