The Pitfalls of “No-Money-Down” Furniture Deals
It’s no secret that people enjoy living comfortably, especially when furnishing their homes. They seek plush couches and beds that feel like clouds. There’s nothing wrong with wanting a home that looks and feels inviting, reflecting personal pride.
However, what happens when you can’t afford to pay for these items upfront? This is where challenges arise. Many people struggle to manage existing bills, making large furniture purchases a low priority. That’s when “no-money-down” advertisements catch their attention.
These ads promote furniture sales with “no-money-down” at the time of purchase. Yet, critical details are often omitted, spoken so quickly you’d need to understand ‘auction-ese’ to catch them, or printed in text so small it’s nearly invisible. This is how people are lured to furniture stores hosting promotional sales.
Understanding the Fine Print
At the furniture store, inquiring about the “no-money-down” plan yields an inviting response. A cheerful salesperson, with a wide smile, outlines the offer’s benefits. They explain that by using this plan, the store will defer payments and interest for a year, sometimes longer. Everything sounds appealing.
Unbeknownst to you, during this conversation, you’re guided to their desk. There, the salesperson explains that you need to spend ten minutes filling out an application for a store credit card. They’ll reiterate that no money is required upfront and that payments and interest are deferred for a year.
While you aren’t spending money immediately, you’re charging the furniture to the newly approved store credit card. Technically, the ad is accurate—you aren’t paying upfront; you’re financing the entire purchase. By signing the contract, you agree to owe the store the total amount spent on your furniture.
Monthly Payments
Many furniture stores use the “no-money-down” tactic to draw customers in, enticing them into contracts for monthly payments until the furniture is fully paid. Few notice that the first payment is typically the highest, as it includes much of the money not paid upfront. This amount is then distributed across subsequent payments until fully collected.
Interest Rates
One of the best-kept secrets of “no-money-down” offers is the interest rate—or rather, its eventual increase. Stores often advertise lower interest rates during promotions, but this applies to furniture purchases as well. What they don’t emphasize is that the interest rate reverts to the standard rate for the store credit card. As of May 2011, the average store credit card had a 24 percent interest rate, applied after the promotional period ends.
Additionally, interest begins accruing from the purchase date. The store may claim they’re “holding it back,” but you’re still being charged. As you enjoy your new furniture over the year, these interest charges accumulate on the store credit card.
The Subject-to-Change Clause
Every contract includes a line, often overlooked, stating, “All deals are subject to change.” This clause is the root of many issues. Many sign contracts without hesitation, trusting the deal will remain unchanged, ignoring what this clause implies.
You are subject to any changes the company may impose on the agreement signed at purchase. Imagine the impact if they raise fees or interest rates. Paying your bill on time monthly won’t prevent this, and changes can occur anytime during the contract, even years later.
Regardless of the fine print’s size, the company can argue the clause was present. Often, the only way to exit the contract is to pay the total amount owed.
Late Payments Can Be Costly
Penalties for late payments are nearly as steep as the interest rates in these “no-money-down” promotions. Payments delayed by even a day or two can lead the company to deem you a risk, potentially increasing your interest rates further. Since these cards are issued by stores, they aren’t always bound by certain federal regulations.
These too-good-to-be-true offers are exactly that. While the prospect of owning desired furniture is appealing, the financial trap set by these deals is nearly inescapable once you sign the contract. The best way to avoid financial ruin is to steer clear of these offers entirely. They’re designed to keep you in debt.
