ConsumerWatch: Zero Percent Financing May Prove Costly

SAN FRANCISCO (CBS 5) — Zero-percent financing deals sound tempting when you are making a big purchase. But they can have costly consequences.

Justin Miller financed a new Tempur-Pedic bed through Citibank. Miller said the deal was a credit plan offering 12 months interest free. Even though he had the cash, he decided to finance $5,600.

“No interest for a year is a great deal,” he said. “It sounded good.”

But after Miller made the last payment, he received a bill from Citibank for $1,332.70. A year’s worth of interest Citibank calculated at 25 percent.

“I thought this is crazy, either this is some kind of joke or some kind of scam,” Miller said.

But according to the statement, the plan expired December 2nd. Miller’s payment was due four days later, after the interest free deal expired on December 6th.

“The statement due date was different from what they call the plan due date,” Miller said. In fact Miller believes the due date was intentional to fool customers into making their last payment after the interest rate expires.

Jose Quinonez with Mission Asset Fund said it’s a common practice. Quinonez adds banks rarely go out of their way to tell customers about expiration dates on interest-free deals.

“My recommendation to people is to make sure to pay off the whole balance completely in full by the 11th month, not wait till the 12th month to pay it off,” he said.

Citibank refused to discuss the specifics of Miller’s case, but it told CBS 5 ConsumerWatch the terms of the deal are clearly explained in the seven page contract.

“I’m never going to do business with Citibank again,” Miller said.

Miller was able to convince Citibank to reduce the interest rate to $650. But after ConsumerWatch got involved, Citibank decided to refund Miller all of his money.

(© 2011 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)

  • travis

    Before you ask your personal bank about financing options, ask the store themselves. For example, off the top of my head best buys credit card through hsbc and chase banks offer 0% interest financing for purchases $429 and up basically standard ever since the car has been around. Alot of matress resellers have some similar options

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  • Scott

    Sorry but I don’t feel sorry for this guy one bit. Every no interest finance deal I have done has been financed for X months from the DATE OF PURCHASE. It is stated in the finance plan details and every monthly bill I get shows the end date for the financing plans. We are supposed to feel sorry for this guy because he didn’t pay attention and got charged interest as he should have? Give me a break!

    • Kristen

      I agree. I’ve never had a problem. And I always plan to pay a month in advance so that my last statement has $0.00 on it. You’ve got to stay on top things and be responsible. This guy is an idiot.

  • JJ

    If you have to finance it, YOU CAN’T AFFORD IT! Stay away from banks!

    • Daniel

      Read the article. He had the cash.

    • Duncan20903

      Wrong JJ, wrong.

    • BeatPunchbeef

      Way to oversimplify. What if my car is toast? If I don’t have $20k lying around then by your logic I would have to hoof my 45 mile commute. Funerals? My computer goes to hell and I work on a computer for a living? Buying a house? Good advice in some instances (24 inch rims), but I think I’ll stick with reality. It hasn’t failed me yet.

      • Duncan20903

        Since when is a house a necessity? People got along without them for thousands of years thank you very much. Not to mention you can live in a inoperative van down by the river for practically nothing.

        Regardless, being a fellow who doesn’t use credit you shouldn’t talk about thing which you don’t have a grasp of the basic facts. The “due date” the whiner in the instant article is complaining about is the date he needs to have it in to comply with the minimum terms of the card agreement. Not taking advantage of these 0% offers if you have the money to pay isn’t frugality, it’s stupidity. Does a truly frugal person spit on a free $50 bill for no other reason than some irrational dogma? Sorry, the truly frugal do very correctly take advantage of credit cards, and it’s hooey to claim otherwise.

        The man was told when his offer ended and the interest would accrue if he didn’t pay. I’d have had the payments scheduled shortly after getting home from the store. There’s no scam to see here. Move along now.

      • John

        That’s the point of a savings account. If you don’t have any money in your savings account, your living above your means. I don’t know why you would buy a $20k car, when a $5k car will work. There is some instances where it is necessary (house), but other than that, that is obviously the reason that so many people are in debt.

        I think the point of the article is that Citibank clearly knew what they were doing and were intentionally trying to scam people, albeit legally. As a consumer, it shouldn’t be our obligation to assume what the company is saying upfront isn’t correct. It should be our right to know upfront what we’re getting.

    • E

      The guy said he had the cash but was taking advantage of free financing. Makes sense to me.

  • TooManyHobbies

    @JJ: way to read the article. He HAD the money. I might have the money to buy a car too, but if they’re giving away money (0% financing) I’ll put the money in a CD and earn interest on it. This only makes sense.

    FWIW, I always call up a few weeks before the end of offers like this, record the call, and ask them specifically when I have to pay in order to meet the guidelines.

  • The Mgt.

    DO NOT go for the “store credit” from HSBC unless you like paying 75%+ interest rates.

  • Joemama

    5600 dollars for a fking bed? for serious?

    • Duncan20903

      I paid $4400 for mine delivered. Sleeping on an army cot is cheap, but I make a boatload more money when I sleep well. Aside from that there’s just no arguing that two people can sleep comfortably together on anything less than a king. Oh my yes, I almost forgot the lifetime warranty.

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  • Doug

    This guy is a idiot. This is how deferred interest has always worked.

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  • Karen

    GE Capital Bank does same thing. We bought furniture for $3300.00, had 800 left to pay then got a statement for Interest of 1191.32. Raised it back to 2700.00. We did the auto deduct online and we were told by the store that once the interest period was over. We would be charged an interest rate of 27%. NOT back from the beginning of when we bought the furniture from HAVERTYS! Big RIP OFF! Especially when the lie to you.

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