No payment – No interest! No impulse!?!

Isn’t it wonderful? There is absolutely no reason to wait for something you can’t afford now. And the deal is much better than buying it on regular credit that has to be paid starting next month. Ah! what a wonderful consumer-driven world we live in.

It’s also dangerous. In fact, it’s a trap – a credit trap. The objective is to have you commit future income towards the purchase of something you just can’t (don’t want to) wait for. We are such an impatient society aren’t we?  Wait! It gets better – you are further tempted (expected) to spend more than you normally would on the item(s) AND the gamble is that you won’t pay it off completely by the time it comes due.

I have to admit, I’ve been on the no-payment-no-interest (npni) income tax cycle for about three years. What do I mean? It’s simple – buy on a npni deal, payments are deferred for 12, 15 (or even more) months. Your plan is brilliant – when your tax refund comes in you pay it off – in full.

I had a close call a couple of years ago. My income tax refund almost did not come through in time. Whew! Side-stepped that one. Why am I sharing this you ask?  Because, I’m human, I make mistakes. The key is to learn from them. I have discovered that there are some key rules to a successful npni endeavor.

Rule number one, figure out what you need (ahem…want) and how much you are willing to spend. Don’t go for the biggest or the best just because your credit limit says you can – we recently bought a queen-size box spring and mattress. We chose the 2nd least expensive one. I must admit, we were tempted by the super-soft, extra-high, bells and whistles model, but in the end, we stuck to our plan. (I won’t mention our 52 inch tv in the living room – that was a previous impulse npni deal – as I said, you learn from past mistakes)

Rule number two, be absolutely sure you can either pay it off monthly or will have the money when it is due. Do not make purchase decisions on potential pay raises, bonuses, overtime, etc.  Income tax is relatively safe providing you have some income tax knowledge and are certain your refund amount will cover the bill. When in doubt – go conservative. Under-estimate your tax refund and spend even less than that on your purchase.

Rule number three, know what you are  giving up for this purchase. Where else would that monthly or yearly amount go? This is important. If you do not make the decision to commit this income over any other potential need/want, you will undoubtedly be stressed out when you have to pay your npni account. Generally speaking, if you cannot handle emergencies as they come up, you should not be signing a npni deal.

Rule number four, anticipate extra costs. There may be a delivery fee and I recently found out about the deferral fee. I’m pretty sure that didn’t occur last year. But this year, we had to pay a fee to defer the payment. Of course they don’t tell you that until you are sitting across from the sales person ready to make your new purchase. And then, well, you have your heart set on this new item, so how could you possibly say no. Read the fine print! I’m quite certain it was in the flyer that I neglected to go over with a fine-tune comb (some times you need to make a mistake more than once to learn your lesson).

And finally, rule number five, stick to your plan. It can be very tempting to skip a payment knowing you have a year to pay it, or use the tax refund for something else and opt to make monthly payments for the next year. I have a better solution. Pay this purchase off and start a savings account for next year’s purchase. That’s my plan and I’m sticking to it!!

Happy Finances!