6 Tips for Managing Your Zero-interest Promotion
When shopping for furniture for a home my wife and I purchased two years ago, the store in which we found many wonderful pieces was offering a promotion of zero interest for two years. All we had to do was qualify based on our credit rating. The stipulation was that we had to pay a minimum amount each month, which basically equaled the actual cost of the furniture spread out over a two year period. In the small print was also the statement that the monthly payments had to be made on time otherwise the promotional plan would be negated.
Financing our furniture with zero interest for two years was a huge incentive for us since we had spent so much of our available cash on the home purchase. So we grabbed the deal. We had taken advantage of a similar promotion when we bought a new car 3 years ago and that worked out quite well.
One hundred percent of our monthly payments were reducing the principal. The furniture arrived as did the first of many monthly bills. On each bill there was a statement, in red with a red box around it: “WARNING: Promotional Plan(s) ENDING SOON!” Following that was an itemization of each plan we had agreed to when we bought each piece of furniture. Also in red and in all capital letters were statements like “You must pay the balance $xxx.xx of your 24 month plan in full to avoid paying accrued interest charges.” The specific date was mentioned, exactly two years after we had purchased each group of furniture.
I thought to myself after seeing that notice, “This is a great customer service. I don’t have to remember anything and I won’t get caught having forgotten the payment and, worse, having all the accrued interest charges added to the bill. That would have meant I saved nothing by enrolling in the zero interest plan.”
And that is the key. As the rules state, we must have made the minimum payment ON TIME and EVERY MONTH otherwise the interest that would have been excluded, would, in fact, get added to our principal.
With our car purchase, it was simple. We signed up for the monthly amount to be withdrawn automatically from our checking account. Three years later, the amount we still owe on our car is considerably less than the amount I could sell the car for. And in less than two years we will own the car outright, never having paid a cent of interest for the 5-year loan. I’m sure the dealership didn’t lose anything on this. Nor did the manufacturer. The profit they each got was already figured into the purchase price I agreed to. But for me, having access to that money, instead of robbing my savings, was particularly important at a time when I was also buying a new home (not to mention buying furniture for said home with a zero interest loan).
But had I at any time during the two year period missed or underpaid a payment, all of my savings would have been lost.
Here are 6 tips to ensure that you are taking full advantage of the zero-interest promotion.
- Sign up for auto-pay. Every loan will have an option to sign up to have the payment automatically deducted from your checking account. Sign up and you won’t have to worry about sending checks or going online to make a payment.
- Make sure your checking account has enough money in it to cover the loan payment. If a payment comes back as insufficient funds, that’s equal to having missed a payment. And you will also probably get charged a fee from the loan servicer as well as your bank.
- Sign up with your bank to have overdraft protection. That way if you don’t have enough money in the account your bank will “lend” you the funds so you don’t bounce a check (or in this case an auto transfer). You’ll now owe your bank the amount they sent on your behalf, but at least you preserved the zero-interest loan promotion and you can pay back the bank whenever the funds are available.
- Check the statement you receive each month from the lender. On most statements there will be some notice like the one I mentioned above that tells you when you need to pay the full balance and not just the minimum payment required.
- If you buy additional merchandise using the same credit account that offers the zero-interest promotion, double check whether that new purchase has added to an existing principal or whether it has its own due date.
- If you have any doubt about whether you’re current on your payments, call the lender and go over the account with the customer service representative.