12 months, no interest -- I just got slammed with a massive charge of back interest :

[seedebtrun]

A year ago, we made the decision to renovate our kitchen..
We ordered cabinets, counter tops, and a new fridge from a local box retail store..
We paid about 30% of the cost out of pocket, but made the decision to finance the rest.

They were running a special where you could get 12 months, zero interest.
I was expecting a large bonus at work later in the year, that would cover the rest of the costs (over $10,000),
.. which would insure that we didn't get caught paying interest.

Of course, things happen.. and my company cancelled their bonus program last year (blaming the economy).
Without the bonus, we were able to pay down only about $2,000 of the $10,000 due.
I sorta hoped and prayed that something would happen that would enable us to come up with the rest, but we just didn't even get close.

A few weeks ago, I got a bill from the creditor letting me know that a $2500 interest charge had just been applied to my account.
$2500!!.. Just a painful blow.. And after calling the company and seeing if there is anything they could do to help me.. They pretty much laughed me off the phone.

In retrospect, if there was ever a time to play the balance transfer game, this should have been it.
I should have transferred the remaining $8000 to a credit card, where I would at least avoid the back interest..

Anyone else been through anything similar?
Is there anything that I am missing that could have (still can) help?

Thanks
Jefferson

[photo]

I'm sorry to hear what happened.

Think of it this way: you'll probably never buy anything again without money in hand. Those who learn by their mistakes usually come out pretty well in the end.

[disneysteve]

Welcome to the site. Sorry to hear about your financing misadventure. As photo said, though, take it as an expensive life lesson. Dave Ramsey calls stuff like that "stupid tax." Using credit cards and zero percent financing offers is perfectly fine IF AND ONLY IF you already have the money to pay the bill. Buying things you can't afford and spending money you don't yet have very often leads to trouble.

[red92s]

That is certainly an unfortunate turn of events. Painful lesson for sure.

However, this situation is pretty much exactly why those in-store financing programs exist, and continue to thrive. The profit potential from interest is ofter higher than the goods being sold.

[bjl584]

Originally Posted by seedebtrun

A year ago, we made the decision to renovate our kitchen..
We ordered cabinets, counter tops, and a new fridge from a local box retail store..
We paid about 30% of the cost out of pocket, but made the decision to finance the rest.

They were running a special where you could get 12 months, zero interest.
I was expecting a large bonus at work later in the year, that would cover the rest of the costs (over $10,000),
.. which would insure that we didn't get caught paying interest.

Of course, things happen.. and my company cancelled their bonus program last year (blaming the economy).
Without the bonus, we were able to pay down only about $2,000 of the $10,000 due.
I sorta hoped and prayed that something would happen that would enable us to come up with the rest, but we just didn't even get close.

A few weeks ago, I got a bill from the creditor letting me know that a $2500 interest charge had just been applied to my account.
$2500!!.. Just a painful blow.. And after calling the company and seeing if there is anything they could do to help me.. They pretty much laughed me off the phone.

In retrospect, if there was ever a time to play the balance transfer game, this should have been it.
I should have transferred the remaining $8000 to a credit card, where I would at least avoid the back interest..

Anyone else been through anything similar?
Is there anything that I am missing that could have (still can) help?

Thanks
Jefferson

Sorry to hear about your situation. As others have said, there probably isn't much you can do at this point except pay the card off. The best way to avoid this from happening again is to never charge anything that you don't already have the cash on hand to pay for.

[graceful]

Sorry you got caught with all that back interest! Nothing to do about it now.

However, cards like this usually have a high interest rate so better check on what it is and try to transfer to a lower rate card and/or pay off as much as possible as soon as possible.

Good luck!

[JustBill]

It is regretful to read about your experience. But there is no way to un-ring the bell at this time. However.it sounds as though this account carries a pretty strong APR. Your thought about balance transfer may still have some merit. Since it appears you owe about 10.5k (8k plus the newly accessed 2.5k interest), you can reduce the interest outlay going forward if you surf the balance. Assuming you intend to make monthly installments to retire the balance of course.

[snafu]

Sadly you are caught in this scam. The retailer counts on customers being unable to pay their balance in full on the due date. Interest charges go right back to the initial date of purchase but as mentioned, try to find a lower rate CC and throw everything you can to clear it asap.

I was challenged the other day to have a no discretionary spending month for February. It means a careful meal plan primary using existing pantry and freezer foods [Jan.31 st]. Lunches from home, no restaurants, take-out, fast food or deli counter. A specific sum set aside for fruit, dairy and transportation. Once the $$$ is gone, so is spending. Entertainment must be free or from membership already paid. Valentines gifts are home made or no cost via gift cards for example. No new clothes, dry cleaners, gifts etc.

Non discretionary items like mortgage, utilities, CC/loan payments are listed and go as always.

[disneysteve]

Originally Posted by snafu

Sadly you are caught in this scam.

I'm going to defend the retailers on this one. I don't think it is a scam at all. They didn't do anything deceptive. The terms of the deal were clearly stated. OP knew what he was signing up for. He just bought something he couldn't afford counting on money he didn't yet have to pay the bill and then got burned when that fell through. That wasn't the store's fault.

Calling this a scam is just like all of the people who say credit cards are evil. They aren't evil. They are what they are. If you use them properly, they are a great tool. If you use them irresponsibly, that isn't their fault.

[photo]

Originally Posted by disneysteve

I'm going to defend the retailers on this one. I don't think it is a scam at all. They didn't do anything deceptive. The terms of the deal were clearly stated. OP knew what he was signing up for. He just bought something he couldn't afford counting on money he didn't yet have to pay the bill and then got burned when that fell through. That wasn't the store's fault.

Calling this a scam is just like all of the people who say credit cards are evil. They aren't evil. They are what they are. If you use them properly, they are a great tool. If you use them irresponsibly, that isn't their fault.

I don't want to sound like a broken record, but Steve is absolutely right. Today's legal documents are often ridiculously long, but if we don't understand or don't read them fully, we shouldn't be surprised when the outcome is what we agreed when we signed.

My sympathies are certain with the OP, but sometimes the best lessons learned are the ones that cost us the most.

If we don't understand the repercussions of a legal document, then we shouldn't proceed.

[snafu]

I don't want to seem defensive but there is not a level playing field. A huge percentage of consumers are woefully uninformed about how much credit card purchases can actually cost. They go to instant tax rebate outlets, payday loans, and zero down, zero payments schemes without understanding the pitfalls. I get frustrated trying to explain how mortgage amortization tables work. People do not understand that they pay mostly interest, very little principal for the 1st 15 years of their 30 year mortgage for example. If you try to get a friend to understand how important a MER is to their portfolio...their eyes just glaze over.

[disneysteve]

Originally Posted by snafu

I don't want to seem defensive but there is not a level playing field. A huge percentage of consumers are woefully uninformed about how much credit card purchases can actually cost. They go to instant tax rebate outlets, payday loans, and zero down, zero payments schemes without understanding the pitfalls.

I agree with you that there is a lot of predatory lending that goes on but I don't think what OP described is one of those cases. He knew the deal. He knew what would happen if he didn't pay on time. He knew he was making a purchase he couldn't afford.

And even with the things that I would say are predatory, they still aren't generally deceptive.

I was at the mall one time and Jackson-Hewitt had cubicles set up to have your taxes done and, of course, advertising refund anticipation loans. On the outside of each cubicle was a poster with the details about the loans. It took me just a few seconds to find the fees and interest rate - I believe it was 175% (it was years ago but that number sticks in my head).

Now I realize that many people don't understand what a 175% interest rate actually means but again, that isn't the company's fault. They shouldn't be responsible for teaching customers basic math skills. As long as the company or lender clearly spells out the fees and rates, after that the onus lies with the customer to make the decision. Even when the companies give a clear breakdown of actual costs for their services, customers still make really crappy decisions.

[wincrasher]

Honestly, I don't even understand what "predatory" really is when it comes to loans.

I think it's just a term made up by ambitious lawyers to vilify lenders so that their clients can get off without paying.

Often people are just wanting out of the terms because they made poor choices or gambled or had a set-back.

It's a fairly common sense idea to go into a deal understanding the terms. Know the interest rate, know the penalties. Ask "how does that work out in dollars?".

Buy a new car lately? The interest rate is in giant 36 point font. The total dollars you'll pay in interest is printed right on the contract.

The OP said they "chose" to finance the balance. They knew full well that interest reverts to day one if you don't pay in full before the term ends. If they were paying attention, they could have transferred the balance well in advance, or found another loan. For all we know, they "chose" to make an investment with the money and took the financing. Perhaps that investment didn't pan out either.

Whatever the case, I sympathize, but do not feel sorry for them.

[fe2o3ez]

I'm not a huge fan of some of the decisions made by government the past decade, and we could debate them for hours. HOWEVER, was there not a component of recent legislation that governs the information lenders are now required to share?

It's been several months since I last looked at a credit card statement, but I believe that each statement is supposed to tell the individual how long it would take to pay off the balance at the minimum payment, and how much it would cost in total? Don't they have something similar that they are required to share with introductory rates that shows how much interest will accrue if/when the balance is not paid in full by xx/xx/xxxx?

(I am sure I could find out for sure with a little online digging, but I refuse to think my brain is rusty enough to make up stuff! )

[LuckyRobin]

I agree that all you can do is call it a learning experience.

I think the best thing to do before using in store financing is to take the total amount and divide it by however many months the term is. Say for simplicity's sake you want to buy a $1200 sectional at a furniture store. $1200 divided by 12 months is $100 a month. If you cannot afford to pay $100 a month, then you should not buy the item in question. You can't base it on money expected by some windfall. It must be based out of your regular budget or you should not use this sort of financing.

I have bought a few things with in store financing (usually glasses paid off over 3 months and a laptop) and because I carefully figured out what my monthly payment would be and that I could afford it out of our regular budget, it worked well for me and I didn't end up paying the interest, because it was paid off in time. It has been a useful tool over time.

[HousingCounselor]

This sort of thing happens all the time. A lot of people don't read or can't understand the terms of what their getting into. Furniture stores are notorious about doing the same thing.

When I bought my bedroom furniture I had the money to pay cash but I put it on a 6 month same as cash because I was determined to pay for it out of take home pay. Of course this was during the glory days when I was earning 6% on my savings.

I remember reading the card agreement in the store before signing. The finance person asked if I could step to the side as I was holding up the line of other customers who wanted to sign their agreements and leave. She then commented that she'd never seen anyone actually read the agreement before signing it. Of course I'm going to read it!!!! I paid it off in 5 months just to be sure I wouldn't be charged.

[photo]

Originally Posted by HousingCounselor

She then commented that she'd never seen anyone actually read the agreement before signing it.

The same thing happens in doctors' offices. What's amusing is when you try to actually read something you're about to sign, the other person tries to explain it to you, as though you are illiterate. I've caught many things in documents that say an institution can "share" my information with others, and that information includes highly personal information. When I bring up that fact, I am met with a very stern, "We would NEVER do that." When I reply, "Then why does it say so in a legal document that you're asking me to sign?" the look is priceless.

Expect the worst, so when it happens you aren't mortified.

[Mr Tipps]

Sorry to hear what happened. Unfortunately you won't be the last person that this will happen to, but hopefully you may be able to stop it from happening to a few others.

You mention that you used the funds to renovate your kitchen? I am not sure how much equity you have in your home, but you may be better off contacting your bank or mortgage broker to borrow these additional funds and add them to your home. I doubt their is anything you could do to not pay the interest already charged, but you could significantly reduce the future interest payments by paying home loan rates versus credit card rates!

The other option may be to shop around for a low interest credit card and transfer the balance. Again, it wont save you the interest you were already charged, but the future interest would be less.

Hope this helps.

[YLTL_Dan]

I'm currently doing some research on this topic, and so far I've found the stat that 80% of no interest/no payment 'deals' aren't paid off before the original due date.

Since most people fail to stay within the contract and it is clearly a boon to retailers - some of which stay alive thanks to this setup - I like the idea of these contracts getting questioned.

If I offered someone a $10,000 loan today (no interest/payments for one year) and told them they could have it for a full year, most people would take it even after I told them the dangers (accrued interest). We are an optimistic creature and unfortunately most of us need protected from our optimism getting turned against us.

[disneysteve]

Originally Posted by YLTL_Dan

I'm currently doing some research on this topic, and so far I've found the stat that 80% of no interest/no payment 'deals' aren't paid off before the original due date.

I have no idea if that is accurate or not but even if it is, that is not the fault of the lender but rather of the borrower.

most of us need protected from our optimism getting turned against us.

And what would that protection consist of? Should lenders not be allowed to make these offers because people are too irresponsible to follow the rules? I'm a firm believer that they can not legislate away stupidity as hard as they may try.