Calling on all my ADD/ADHD/ASD fam… What have I overlooked?
Nah, jokes. I know this will be too long for most ppl, so I’ll try break em down into sections.
This is the only article I could find on the topic. Handy Calculator in there too.
https://moneysmart.gov.au/other-ways-to-borrow/interest-free…
so, if it mentions something in here… I’ve read/addressed it. happy to receive other links as well
I’ve also search within OzBargain for “interest free” and looked 10 pages back (although those posts start getting older than 10yrs, so the info seemed outdated when I read them).
OBJECTIVE:
What’s the catch with these interest free plans. What DON’T you use them?
(If I truely have addressed every issue and you’re wondering why I even posted something so long if I already had the answer… I am asking for your critical logic or confirmation)
SCENARIO:
(after being approved of course) walking into the store, pointing out which Washer, Dryer, Dishwasher, Fridge/Freezer, TV, Microwave and other appliances within a $10,000 budget, then paying $176/month for the next 5yrs, all for your new house (which is nearing completion and still have some other major upfront costs to deal with).
Won’t use the card for anything else, payments on time, extra payments to reduce term, get rid of the card after the process, address all fees including potential fees in risk analysis.
PRO:
- ELIMINATING the stress of constantly checking for bargains, sales, cash back offers (which may get rejected), coupon codes, pricing errors/glitches, stock levels etc for multiple different products, over weeks if not months… and severe FOMO if you didn’t pull the trigger when you thought to.
- Getting everything sorted in one go (hopefully delivered around the same time).
- Removing the upfront costs, allowing us to use that money for other things that dp need to be paid upfront, such as landscaping & heating/cooling for the home or even our honeymoon (which we keep pushing forward every year, lol)
CON:
- paying more for products since you’ll have to pay the ticketed price tag and won’t be able to use coupons codes or discounted gift cards.
QUESTIONS:
- Is it a massive hit to your credit rating? Will this be hanging over my head for 4-5yrs, limiting my eligibility to refinance my home loans or apply for other credit cards for bonus rewards points?
- Can you def make extra payments without any penalties? (it says you can on the GEM Visa, but I can’t see it documented for Mastercard GO)
- Can you bargain prices down on a bunch of items, then when it comes to payment, just put it on the Latitude card? Or is it processed differently? i.e. What is the actual process when you are paying on one of these cards?
CONTEXT/BACKSTORY (long part to skip if you want, lol)
I often wondered how Harvey Norman was still in business, esp since online shopping became a standard. Mainly because their prices at first glance were never as low as others. Obvs their overhead would be way more e.g. buildings, advertising, staff etc. I do remember as a child though (90s), my father going to Harvey Norman and getting a ton of stuff. Even asking me and my brother to go pick out some stuff e.g. Microsoft Sidewinder Force Feedback Wheel plus a bunch of games. I asked him more recently how/why he did this, and he told me because of their massive interest free period, he was able to get heaps in one go and pay it off slowly. Back then, the only cost an extra one off $25 account fee. Makes sense right. You could deck out your whole home instantly, then pay it off over the next 4-5yrs, without having to pay much more.
This system has changed now though. Instead of the $25 one off fee, there is a $8.95 monthly fee. I’m not sure what was available before, but there are many excluded brands/products, including but not limited to… those sold under agency agreements, high end European brands and Apple (although Apple does have their own interest free plans).
These seem to be via Latitude now, so applying for a credit card obvs comes with its own risks. We all know that paying upfront is better than being in debt. You can also bargain that price down and use coupons codes and gift cards for further discounts. Or even Buy Now Pay Later systems, allow you to pay it over a couple months.
But this isn’t about those one off purchases for a couple of thousand dollars that you’ve been saving up for to replace something you already have, so no urgency… This is more like spending $10,000 or more on everything you need for your new house. Not only tech, but furniture as well. I guess maybe that’s how Harvey Norman is still going (besides all the political stuff that I am not going to get into), because they are that one stop shop for everything you need in a home, which you can now afford with these interest free payment systems.
And I guess even though their prices are higher, price matching system kinda negates that, as does your bargaining skill with the sales staff, hence why ppl still buy from them. And I’m sure the store still makes money on up sales and warranties and care plans etc too.
You can instantly say… “yeah, it’s interest free, but that monthly payment of $8.95 can be viewed as the interest”, which I def agree with. But from time to time (like now), Harvey Norman will give you a gift card valued at 10% of the credit amount e.g. $100 GC for $1,000 purchases or $1,000 GC for $10,000 purchases. Sure, you prob have the similar exclusion on what brands/products you can purchase with that gift card, but that’s not an issue if you’ve checked already. So as long as the gift card amount is more than the total monthly payment fee… that cancels out that argument, yeah? Esp if you can do extra payments to pay off sooner i.e. less months, less monthly fee
So, putting most of that to the side. Putting aside lifestyle inflation and acting your wage and just spending on what you can afford now. Knowing they won’t approve you for credit if they don’t think you’ll be able to pay it off (much stricter since the Banking Royal Commission). Knowing what your own budgets are yourself and not seeing any issues with affording a couple hundred bucks extra a month in payments, regardless of what may or may not happen in the future… WHAT’S THE CATCH!?
P.S. after me and my wife move into our new house in a new area, we will be looking for new careers. Which I know isn’t a guarantee for better paying jobs… but we are both upskilling/studying atm, so it is likely that we will. Obvs we won’t leave our current jobs for less money, so I am going off what I can afford now. Just adding this part is, as I believe I will be able to pay everything off faster than the 5yr period, which improves that monthly fee vs gift card ratio. Obvs I would just leave a couple smaller appliances of the main purchase, and get these with the giftcard e.g. $10,000 budget on big items, $1,000 budget on smaller items like a microwave, air fryer, multicooker, blender, mixer etc
I have a few things on my GEM Visa which I will pay off over the next 2-5 years.
You don't necessarily need to pay HN ticket price either, their website customer service will often price match.
Another benefit of paying off over five years is you beat inflation, that $176 monthly payment should (if inflation does its thing) be a lot less in four years than it is now.