Should I finance a new home theater at 0% even though I have the cash for it?
"Be very careful with this.  When we tried this with furniture, they charged an ""administrative"" fee to setup the account.  I believe it was about $75.  So if you defer interest for one year on a $1000 purchase and pay a $75 administrative fee, it's 7.5% interest. Also, they don't always send you a bill when it's due, they just let you go over the date when you could have paid it without paying interest, and then you owe interest from the date of purchase.  These plans are slimy.  Be careful." "I think so.  I am doing this with our furniture.  It doesn't cost me any more money to pay right now than it will to pay over the course of 3 years, and I can earn interest on the money I didn't spend. But know this: they aren't offering 0%, they are deferring interest for 3 years.  If you pay it off before then great, if you don't you will owe all the accumulated interest. The key with these is that you always pay it, and on time.  Miss a payment and you get hosed.  If you don't pay on time you will owe the interest that is being deferred.  They will also be financing this through a third party (like a major bank) and that company is now ""doing business with you"" which means in the US they can call you and solicit new services.  I am willing to deal with those trade offs though, plus, as you say, you can always pay it off. WHY THEY DO IT (what is in it for them...) A friend of mine works for a major bank that often finances these deals here is how they work. Basically, banks do this to generate leads for their divisions that do cold calls.  If you are a high credit, high income customer you go to a classic bank and request cash, if you are building credit or have bad credit, you go to a ""financial services"" branch.  If you tend to finance things like cars and furniture, you get more cold calls." Debt creates risk.  The more debt you take on, the higher your risk.  What happens if you lose your job, miss a payment, or forget to write the final payment check for the exact amount needed, and are left with a balance of $1 (meaning the back-dated interest would be applied)?  There is too much risk for little reward?  If you paid monthly at 0% and put your money in your savings account like you mentioned, how much interest would you really accrue?  Probably not much, since savings account rates suck right now. If you can pay cash for it now, do it.  So pay cash now and own it outright.  Why prolong it?  Is there something looming in the future that you think will require your money?  If so, I would put off the purchase. No one can predict the future.  Why not pay cash for it now, and pay yourself what would have been the monthly payment?  In three years, you have your money back.  And there is no risk at all. Also, when making large purchases with cash, you can sometimes get better discounts if you ask. "You should look at the opportunity cost for your money (i.e. what kind of return it could generate otherwise).  We took advantage of these types of offer (zero interest for x months) in the past with the goal to redirect the money to the mortgage (it was 7.5% back then) and we made sure we don't get hosed by the surprisingly high interest rate by having a big reminder in the bulletin board in the kitchen to make sure we pay off the money before the interest rate kicks in.  So we basically reduced our interest on the mortgage during that period.  Oh - we use an all-in-one account (Manulife One) so that was real nice. I would stay away from those ""interest-deferred"" offers - it's totally not worth it." I think most people have already answered this one pretty well.  (It's usually worth it, as long as you pay it off before the interest kicks in, and you don't get hit with any fees.) I just wanted to add one thing that no one else has pointed out:  Applying for the loan usually counts as a hard pull on your credit history.  It also changes your Debt-to-income ratio (DTI).  This can negatively impact your credit score. Usually, the credit score impact for these (relatively) small loans isn't that much.  And your score will rebound over time.  However, if it makes your score drop below a certain threshold, (e.g. FICO dips below 700), it could trip you up if you are also applying for other sources of credit in the immediate future. Not a big deal, but it is something to keep in mind. I have abused 0% interest programs time and time again, but only because my wife and I are assiduous about paying our bills on time. We've mostly taken advantage of it with bigger purchases that we've done through Lowe's or Home Depot (eg - washing machines, carpeting, stove, fridge), but its been well worth it.  There are two rules that we set for ourselves whenever we do a 0% interest program -- 1) We have the money already in savings so that we can easily pay it off at any time 2) We agree to pay our monthly bill on time There's nothing quite like using another person's money to buy your things, while keeping your money to gain interest in a savings account. You know what? Pay cash, but ask for a discount. And something fairly hefty. Don't be afraid to bargain. The discount will be worth more than the interest you'd get on the same amount of money. And if the salesman doesn't give you a decent discount, ask to speak to the manager. And if that doesn't work, try another store. Good luck with it! "Pay cash.  You have the cash to pay for it now, but God forbid something happen to you or your wife that requires you to dip into that cash in the future. In such an event, you could end up paying a lot more for your home theater than you planned. The best way to keep your consumer credit card debt at zero (and protect your already-excellent credit) is to not add to the number of credit cards you already have.   At least in the U.S., interest rates on saving accounts of any sort are so low, I don't think it's worthwhile to include as a deciding factor in whether not you ""borrow"" at 0% instead of buying in cash." I won't repeat what's already been said, but I agree that it's a good move to take advantage of the free financing so long as you read the fine print carefully, keep the money designated to pay off this debt and not use it for anything else, and make sure to pay it off before you get smacked with some bad interest. One thing that hasn't been mentioned is that this kind of offer can help build credit.  You mentioned that you already have excellent credit, but for someone who has good credit, this could be an account that, if used carefully, could give their credit a boost by adding to their history of on-time payments. "If you do it, be sure to read what you sign. They'll sign you up on some type of ""credit insurance"" and not tell you about it. It costs like $10 a month. If you don't sign up for that, you should be fine. I bought my HDTV this way, though I wish I would have saved and paid up front. I'm moving more towards the ""cash only"" mindset." I bought a Thinkpad in Dec 2007 using BillMeLater, which was working with IBM/Lenovo at that time.  I was getting the notebook at the lowest price available, from the manufacturer.  I had the money to pay for it -- around $1400.  But I went ahead and took the offer from BillMeLater.  It was essentially a 12-month zero-interest credit card balance transfer loan.  Sketchy bit its very nature.  They spammed my inbox with solicitations, which was annoying.  But I set my bank to pay the monthly amount (or slightly over, since it decreases each month) and to make the final payoff -- all at the time of purchase.  This  worked just fine -- but I still had spam from BillMeLater for quite a while.  I still ran a slight risk that something would go wrong, at which point I'd face interest charges -- but I would then have paid off the item plus those interest charges.  Luckily I avoided that.  I'm not sure I'd bother doing this again, but if the sticker price was high enough, I might be tempted.... Zero percent interest may sound great, but those deals often have extra margin built into the price to make up for it. If you see 0%, find it cheaper somewhere else and avoid the cloud over your head. I would never consider such an offer. As has already been mentioned, there are likely to be hidden costs and the future is never certain. If you feel that you are missing out, then negociate a lower purchase price now. People often forget that something is only worth what someone is willing to pay for it. With any significant purchase it's always worth bargaining. Read the fine print and you will be fine.  The big caveat is that if you miss a payment for any reason, you will be in default as far as the promotional financing is concerned and will typically owe ALL of the accrued interest, which is usually computed at 20-25% per year. Personally, I use these sorts of offers all of the time at places like Home Depot for stuff that doesn't generally need warranty service. (Wood, tools, etc) Usually I pay the thing off over time as CDs mature. If I'm buying a TV, computer, etc. I always use my AMEX, because I get an extra year of warranty service and points for free.
"If you find a credit card with 0% interest, let us know!  I guess I'll just be the one to tell you that this belongs in /r/personalfinance  No, a new credit card balance won't affect your existing mortgage. However opening that mortgage so recently definitely dinged your credit substantially and it almost definitely hasn't recovered yet so your credit score isn't as good as you think it is from the home purchase.  If you can magically finance $4k for 0% APR then obviously you should do that since you're house poor but be absolutely sure you're right about the terms of financing. I normally make purchases like that on a rewards credit card (airline miles) then pay it off immediately but that's just me.  Using the word ""adulting"" answers that question immediately." "Doomed is the word I wouldn't say about this.  Hollywood has been producing shitty movies (which is why nobody goes to movie theaters anymore) and it's harder to find movies to go to that are worth it.  Sure... There are an increasing amount of movies like ""Get Out"" and ""Moonlight"" and even ""Logan"" that are smart, insightful and fun to watch but with those movies comes movies like another Marvel Cinematic Universe film or a comedy film featuring Seth Rogen or some action movie like ""Independence Day: Resurgence"".  Hollywood used to rely on people going to movies without knowing if it was good or not to earn back their money. Now that we have Rotten Tomatoes which gauges critic and user reaction and easy access to rent movies that used to be in theaters; Hollywood should have incentive to make better movies but they still make 80% shit, especially considering that streaming movies does not make a movie studio a lot of money then when it's in theaters.  Movie theater operators are shaking in their boots because of the threat that the digital age poses... ""Why go to a theater and waste money on crap when you can wait for it at home?""  MoviePass is quite possibly the movie theater chain's only hope at remaining relevant. I still feel like I'm able to watch a movie in a comfy environment with unique experiences in a theater and I feel like the theater is the only place where the audience is engaged and interacting with each other. It would be a shame to lose that in exchange for movie watching where it's all done solo. It's okay but it's not as fun as a theater experience.  MoviePass offers the best concessions for the best deals. I don't mind having to pay near the theater and I don't mind that my data is being given to analytic companies; Hollywood needs to know that I and others like so and so and that data I'm hoping can be used to make better movies. The thing that'll hinder MoviePass' chances of success is some holdouts.  AMC isn't holding out because they think it'll do harm to their business; far from it... Their ticket prices are $12 for a regular film, similar to all the other chains and they make alot of money from overpriced concessions anyway. (with the exception of the fancy food they're adding in their theaters)  AMC's intention is to create a more expensive subscription service for the sole reason of hoarding most of the profit; MoviePass is good in that the data can be used to improve movies, AMC is bad in that it's going to be no different than MoviePass with the exception of some perks relating to food and seating. If they could do something and add IMAX and 3D as upgrades to the subscription service then it won't be as bad as it seems (maybe even convince MoviePass to do the same) but AMC's move is solely profit based and not in any way a reaction to possible harm.  I found out my theater is supported by MoviePass so I'll gladly pay the $10 to see what the hype is all about. In a world where fragmented streaming services don't allow me to get the movies easily after they're in theaters and Hollywood movies are getting worse; this might be the answer Hollywood needs." I have done this for years and have been quite successful at it. Two reason I even need to do this - desire to pay for engagement ring and pay for 150 person wedding without using my nest-egg/savings.  You need to keep a document that details when the free APRs run out, and you need to setup automatic payments of the minimum balance from your checking account so you ensure you do not miss a payment.  You need to understand when you are going to need to make big purchases of homes/apartments/cars so that you can ensure you aren't doing this right before your credit score is being checked (Need to leave 12 months without opening new accounts before doing this).  I have been able to finance about $60,000 worth of unsecured debt paying between 3-5% interest per year. We have an unsecured credit line with Citibank that charges 14% and is capped at $10,000, and Discover Personal Loans charge around 14% as well (in pre-paid interest!).  I would say, all things considering, that this is a great deal if you don't have a secured line of credit with a low interest rate.  It is something, however, that if you aren't diligent can get away from you. From my experience I would rather pay a small amount of interest while allowing my savings and retirement to grow interest (hopefully greater than 3-5%) than pay the huge expense and start from zero. But if you miss a single payment on a 0 APR balance transfer they charge you all back interest concessions plus charge you a penalty rate.  Like many of the other posts, you need discipline to make this work. It is a decent time to purchase real estate despite dsquid's opinion.  I feel dsquid is falling for the old economic psychology of what ever direction its going it will continuing in that direction, which is a bad mentality for any investing (up or down).     This may not be the bottom, and there is some sign that another dip is coming with in a year or two.  But if you purchase now, and focus on a few key factors you may end up on the upside of the swing.  First and foremost location matters more then value of the property.  When the pent up demand is eventually released (after we get employment moving in the right direction) you will see a land grab.  The first and highest valued places are those with nice neighborhoods and good schools as the young families (economically unburdened) start making homes.    Second pay attention to valuation in so much as your burden.  This means consider taxes and mortgage and terms of mortgage (stay away from variable or balloon rates).  When thing go up the interest rates will lead the way.  In this time of uncertainty you should make sure you can cover your mortgage payment with ease.  Put plenty down (20% being the recommended to avoid mortgage insurance and long term costs) and shoot low on  price.  If you're handy you may even consider buying something that needs minor work (outdated kitchen or the like).   If you shoot lower then your limit, then you'll be comfortable even if things turn sour for you.  Ultimately all this hinges on what you want to do with the property.  Its a wise time to buy homes today where you will be able to rent them out tomorrow.  But the important thing is aim in the middle instead of at your limit (450 is definitely your limit).  Remember banks will always tell you that you're able to afford twice as much as you actually should.  And keep in mind, no matter how new or nice the home, it will need work at some point and that costs.  So you should have that in mind when you consider savings.  Based on your information I wouldnt shoot higher then 250-300k.  I have friends who make your salary in dividends plus two incomes and they are comfortable in their home at its 250 price.  They are able to afford repairs and upgrade regularly and arent threatened by potential tax hikes (though they gripe of course).   The one good piece of advice from dsquid IMHO is that you should be ready for the environment to change.  Higher interests rates will weigh on your comfort as much as CPI and increased taxes will so plan for them to be much higher and you'll be ahead of the game. You can't buy it outright. You can't take the time to save up. if the remaining choice is between a card that charges from day one, and a card with this kind of grace period, the grace card is the better choice. Plan wisely, pay it in full before that rate starts to be charged. One additional note - There are two groups of people, the pay-in-fullers and the balance carriers. I believe that one should pay in full, and never pay interest.  A zero rate offer can be used by the balance carrier to feel great for 12 months, but have even more debt after the rate kicks in.  As a pay-in-full user, I've used the zero rate to throw $20K at the 5.25% mortgage, and planned a refinance to 3.5% just as it ended. a $750 savings (after the tax effect) well worth the bit of effort.  The fees should be in the fine print. My zero rate had a transfer fee, $50 max, which was nothing in comparison to the savings. "For some people, it should be a top priority.  For others, there are higher priorities.  What it should be for you depends on a number of things, including your overall financial situation (both your current finances and how stable you expect them to be over time), your level of financial ""education"", the costs of your mortgage, the alternative investments available to you, your investing goals, and your tolerance for risk. Your #1 priority should be to ensure that your basic needs (including making the required monthly payment on your mortgage) are met, both now and in the near future, which includes paying off high-interest (i.e. credit card) debt and building up an emergency fund in a savings or money-market account or some other low-risk and liquid account.  If you haven't done those things, do not pass Go, do not collect $200, and do not consider making advance payments on your mortgage.  Mason Wheeler's statements that the bank can't take your house if you've paid it off are correct, but it's going to be a long time till you get there and they can take it if you're partway to paying it off early and then something bad happens to you and you start missing payments.  (If you're not underwater, you should be able to get some of your money back by selling - possibly at a loss - before it gets to the point of foreclosure, but you'll still have to move, which can be costly and unappealing.)  So make sure you've got what you need to handle your basic needs even if you hit a rough patch, and make sure you're not financing the paying off of your house by taking a loan from Visa at 27% annually. Once you've gotten through all of those more-important things, you finally get to decide what else to invest your extra money in.  Different investments will provide different rewards, both financial and emotional (and Mason Wheeler has clearly demonstrated that he gets a strong emotional payoff from not having a mortgage, which may or may not be how you feel about it).  On the financial side of any potential investment, you'll want to consider things like the expected rate of return, the risk it carries (both on its own and whether it balances out or unbalances the overall risk profile of all your investments in total), its expected costs (including its - and your - tax rate and any preferred tax treatment), and any other potential factors (such as an employer match on 401(k) contributions, which are basically free money to you).  Then you weigh the pros and cons (financial and emotional) of each option against your imperfect forecast of what the future holds, take your best guess, and then keep adjusting as you go through life and things change. But I want to come back to one of the factors I mentioned in the first paragraph.  Which options you should even be considering is in part influenced by the degree to which you understand your finances and the wide variety of options available to you as well as all the subtleties of how different things can make them more or less advantageous than one another.  The fact that you're posting this question here indicates that you're still early in the process of learning those things, and although it's great that you're educating yourself on them (and keep doing it!), it means that you're probably not ready to worry about some of the things other posters have talked about, such as Cost of Capital and ROI.  So keep reading blog posts and articles online (there's no shortage of them), and keep developing your understanding of the options available to you and their pros and cons, and wait to tackle the full suite of investment options till you fully understand them. However, there's still the question of what to do between now and then.  Paying the mortgage down isn't an unreasonable thing for you to do for now, since it's a guaranteed rate of return that also provides some degree of emotional payoff.  But I'd say the higher priority should be getting money into a tax-advantaged retirement account (a 401(k)/403(b)/IRA), because the tax-advantaged growth of those accounts makes their long-term return far greater than whatever you're paying on your mortgage, and they provide more benefit (tax-advantaged growth) the earlier you invest in them, so doing that now instead of paying off the house quicker is probably going to be better for you financially, even if it doesn't provide the emotional payoff.  If your employer will match your contributions into that account, then it's a no-brainer, but it's probably still a better idea than the mortgage unless the emotional payoff is very very important to you or unless you're nearing retirement age (so the tax-free growth period is small).  If you're not sure what to invest in, just choose something that's broad-market and low-cost (total-market index funds are a great choice), and you can diversify into other things as you gain more savvy as an investor; what matters more is that you start investing in something now, not exactly what it is. Disclaimer: I'm not a personal advisor, and this does not constitute investing advice.  Understand your choices and make your own decisions." "In most cases of purchases the general advice is to save the money and   then make the purchase. Paying cash for a car is recommended over   paying credit for example. For a house, getting a mortgage is   recommended. Says who? These rules of thumb hide the actual equations behind them; they should be understood as heuristics, not as the word of god. The Basics The basic idea is, if you pay for something upfront, you pay some fixed cost, call it X, where as with a loan you need to pay interest payments on X, say %I, as well as at least fixed payments P at timeframe T, resulting in some long term payment IX. Your Assumption To some, this obviously means upfront payments are better than interest payments, as by the time the loan is paid off, you will have paid more than X. This is a good rule of thumb (like Newtonian's equations) at low X, high %I, and moderate T, because all of that serves to make the end result IX > X. Counter Examples Are there circumstances where the opposite is true? Here's a simple but contrived one: you don't pay the full timeframe. Suppose you die, declare bankruptcy, move to another country, or any other event that reduces T in such a way that XI is less than X. This actually is a big concern for older debtors or those who contract terminal illnesses, as you can't squeeze those payments out of the dead. This is basically manipulating the whole concept. Let's try a less contrived example: suppose you can get a return higher than %I. I can currently get a loan at around %3 due to good credit, but index funds in the long run tend to pay %4-%5. Taking a loan and investing it may pay off, and would be better than waiting to have the money, even in some less than ideal markets. This is basically manipulating T to deal with IX. Even less contrived and very real world, suppose you know your cash flow will increase soon; a promotion, an inheritance, a good market return. It may be better to take the loan now, enjoy whatever product you get until that cash flows in, then pay it all off at once; the enjoyment of the product will make the slight additional interest worth it. This isn't so much manipulating any part of the equation, it's just you have different goals than the loan. Home Loan Analysis For long term mortgages, X is high, usually higher than a few years pay; it would be a large burden to save that money for most people. %I is also typically fairly low; P is directly related to %I, and the bank can't afford to raise payments too much, or people will rent instead, meaning P needs to be affordable. This does not apply in very expensive areas, which is why cities are often mostly renters. T is also extremely long; usually mortgages are for 15 or 30 years, though 10 year options are available. Even with these shorter terms, it's basically the longest term loan a human will ever take. This long term means there is plenty of time for the market to have a fluctuation and raise the investments current price above the remainder of the loan and interest accrued, allowing you to sell at a profit. As well, consider the opportunity cost; while saving money for a home, you still need a place to live. This additional cost is comparable to mortgage payments, meaning X has a hidden constant; the cost of renting. Often X + R > IX, making taking a loan a better choice than saving up. Conclusion ""The general advice"" is a good heuristic for most common human payments; we have relatively long life spans compared to most common payments, and the opportunity cost of not having most goods is relatively low.  However, certain things have a high opportunity cost; if you can't talk to HR, you can't apply for jobs (phone), if you can't get to work, you can't eat (car), and if you have no where to live, it's hard to keep a job (house). For things with high opportunity costs, the interest payments are more than worth it." "Your use of the term ""loan"" is confusing, what you're proposing is to open a new card and take advantage of the 0% APR by carrying a balance.  The effects to your credit history / score will be the following:"