"No Payments Until Later" Deals Still Abound

Maybe it's just the effect of the post-Christmas push, as businesses try to drum up sales without being able to throw Santa into the frame or make you feel guilty that you're not buying your spouse a new car for the holidays, but I'm still seeing quite a few of those "Make no payment until _______" ads on TV (both on Canadian and US channels).

As with the use of credit cards, of course, there are ways to take advantage of such offerings without inadvertently hurting yourself financially. A credit card that has no transaction-based or monthly/annual fee, gives you some sort of kickback per usage (such as points or air miles) and for which you routinely pay the full balance off each month? That's a great thing! It's actually an easy and effective way to save money, as strange a concept as that may be for something as traditionally harmful as most cards tend to be to their owner's wallet. (The credit card companies have a less-than-affectionate term for people who pay off their balance each month, by the way: "deadbeat"! Isn't just knowing that you're being referred to in that way by organizations that delight in charging their other customers 18%+ interest for the privilege of carrying a balance enough motivation to make you want to be one?! I'm proud to have been a deadbeat for roughly two decades now!)

Just as most card-holders end up incurring large interest charges, though, when it comes to those "Don't pay until 2012!" offers, it can similarly be a bum deal for the consumer. Some businesses quietly accrue interest on the loan that they've extended to you (they're simply allowing you to forgo making payments for a certain period of time while the interest builds up). Even if they don't do that, chances are that interest is being applied once the payment schedule kicks in. Vicki and I have done one or two of these offers in the past, but only when there's a clear date at which point interest begins and where you're allowed to pay the entire amount off prior to that date. In a setup like that, you're basically getting the merchandise (whatever it is) early, at no additional cost. We also always had the rule that the money for the item had to be in the bank, actually collecting interest, rather than being hypothetical cash that we'd make/save/magically conjure up at some distant point in the future. In other words, we lived by the same edict as with our use of credit cards: you can only buy stuff that you already have the money to pay for! (Also known as the mantra of the "living within your means" set!)

With the credit crunch underway worldwide right now, I thought we might see an end to these enticements that generally encourage people to purchase what they can't afford. Looks like, at least for the moment, my optimism was premature.