When does a 0% purchase plan make sense for you?

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Sellers of big ticket items know that for many people a good price isn’t enough. Buying an expensive big screen TV, or new kitchen appliances, or a bunch of new furniture will require a loan. That’s why a lot of stores that sell expensive household items offer store financing.

You will either be offered a store card with a set amount of credit to buy whatever you want in the store or financing for a particular purchase or item. Often you will be tempted by 0% interest offers. But not all offers are created equal.

Read more: The credit mistake 80% of people under age 50 are making

Beware of ‘no no no’ plans

We’ve all seen the pitches: ‘No down payment, interest or payment ’til 2019!’

Wow, can these things blow up on people! Whether you’re talking about a ‘no no no’ plan like the one mentioned above or something more sane like six months same as cash, you need to beware.

The best 0% cards and offers give you a long interest holiday and perhaps a payment holiday. When that time ends, interest will start from then forward. If you are offered 0% for one year on the best type of plan, you will pay 0% for that first year regardless of when you finish paying off your balance.

However, be aware of a gotcha on many 0% deals: You may lose your entire 0% benefit and be charged retroactive interest back to the date of purchase if you have not completely finished paying off your balance before your interest holiday ends!

So you should take out 0% cards only if you can live with the terms required to get the full advantage of the 0%. If you can’t pay off the balance in full by the end of the payment and/or interest holiday, then often the 0% becomes a very high rate in the range of 25%. And remember, sometimes that is charged retroactively. Read all the rules upfront to protect your wallet from heartache.

Clark even says it’s acceptable to take out a cash advance on a credit card to make that payment if you have to. Anything to not face that back-breaking retroactive interest!

Watch video: The dangers of ‘no no no’ plans

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