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I live in France. I bought an apartment with a mortgage a month ago. I've been buying plenty of stuff for this apartment like furniture, decoration, oven, etc. And I still need to buy other stuff.

I've been offered to pay some of them cash and some of them in installments without any fee or interest. To contract this 0% APR credit with zero extra fee, I am not required to tell the credit company about the other credits / mortgage I am paying off.

Should I prefer paying with this 0% fee 0% APR credit, or pay everything at once? My guts tells me I should go with the 0% credit, but I'd like to have an second opinion on that. I have enough money to pay on the spot.

Kate Gregory
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dotixx
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9 Answers9

57

There are several issues with paying for furniture and appliances with 0% credit instead of paying with cash.

  1. When you pay with 0% credit, you might be tempted to spend more on something than you would have if you paid with cash, because it feels like free money, and you've justified in your mind that the extra you earn will help pay for the more expensive item.

  2. Businesses don't offer 0% credit for free, and they don't lose money on the deal. When you shop at a store that offers 0% credit, you are generally overpaying for the item. By shopping at a store that does not offer 0% credit, you might be able to get a better price.

  3. Your savings account is likely earning very little interest. You might invest the money you intend for your purchases in a place that gets better returns, but in most of these places the returns are not guaranteed, and you might not do as well as you think.

  4. 0% loans typically come with lots of conditions that have very heavy penalties and interest rate hikes for late payments. You can mitigate this risk by setting up automatic payments, but things can still go wrong. Your bank might change your account number, making the automated payment fail. As you mentioned, you might also forget to put the proper amount of money in the account. A single mistake can negate all of the tiny gains you are trying to achieve.

Ultimately, the decision is yours, of course, but in my opinion, there is very, very little to gain with buying something on 0% credit when you could be paying cash.

Ben Miller
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Read the terms and conditions very carefully. Many zero percent deals have a requirement that you pay back at a certain date, and if you don't, you'll have to pay some enormous percentage. Nobody will remind you of the date, because the lender has the secret hope that you will forget.

gnasher729
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A friend recently bought an 800€ TV on 0% financing. Sounded like a sensible thing to do. Why pay 800 when you can pay 80pm for 10 months?

It took 30mins to set up the 'loan'. She had to sign all kinds of documents, giving away much personal information (age, employment info, income, email address etc). She now has a financial relationship with an institution which has nothing to do with the item purchased. She is bombarded with all kinds of financial offerings.

She regrets taking out the finance. She had the money. The hassle and the unwanted links to banks make the deal unattractive. Perhaps she should have tried to make a cash deal...

paul
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If you can set up automatic payments (like direct debits in the UK) and you can be disciplined enough to not spend the money on something else then this can be a good way of building/improving your credit rating. Banks / Lenders like it when they see you have previously taken, and repaid, credit. This can help you get better finance deals etc. in the future.

Update: as noted in the comments France had a different financial system and people do not have credit ratings, so this point isn't valid in France

mattumotu
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If a shop offers 0% interest for purchase, someone is paying for it.

e.g., If you buy a $X item at 0% interest for 12 months, you should be able to negotiate a lower cash price for that purchase. If the store is paying 3% to the lender, then techincally, you should be able to bring the price down by at least 2% to 3% if you pay cash upfront.

I'm not sure how it works in other countries or other purchases, but I negotiated my car purchase for the dealer's low interest rate deal, and then re-negotiated with my preapproved loan. Saved a good chunk on that final price!

Nitin Alabur
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Two cases:

  1. You take the credit and reinvest the cash equivalent (be it a savings account or otherwise), yielding you the x% at virtually zero risk. Unless of course you consider possibility of your own negligence a risk (in case of missed payments, etc.).

  2. You pay by cash and have the peace of mind at the cost of that x%.

The ultimate decision depends on which you value more - the $ you get from x%, or the peace of mind.

Murch
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Lukas
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There are lots of good points here already, but something that hasn't been mentioned yet is what would happen if the purchased items break or are somehow defective? Depending on the warranty and how trustworthy the company is, there could be an advantage to not having fully paid for the item yet when a defect is discovered, as it might incentivize the company to be more attentive to your warranty claim, since they are faced with knowing that you could stop making payments if they don't act in a timely manner. Note I'm not suggesting you stop making payments in this case, just that companies (and banks) are oftentimes more willing to work with you when you owe them money.

TTT
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Remember that due to inflation you are paying back the loan with cheaper dollars in the future. If there are no gimmicks in the loan like early payment penalties, or must pay by a certain date or that the credit was for a store that sold the products at a higher price than you could get elsewhere then you are not just getting free money they are paying you to take the money.

Germand Delatouche
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0% furniture loans can hurt your credit rating. I was told by a bank mortgage officer (sorry I can't cite a document) that credit rating algorithms consider "consumer" loans like 0% appliance loans and certain store-specific credit cards as a negative factor, lowering your overall score. The rationalization given was that that taking that type of credit is an indicator that you have zero cash reserves. The actual algorithms are proprietary, so I don't know how you could verify this. If true, it runs counter to the conventional wisdom that getting credit and then paying it off builds your credit score.

Kengineer
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