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