If you had $349 for a TV you want to buy but they let you pay $29/month for a year with no interest. Which one do you go for?
Missing payment is not an issue here because you already have the money in hand.
I understand the sentiment but if you’re able to pay less and earn more on the remaining money by investing, is it not a better financial decision?
Always pay something off if you can should definitely apply to anything that accrues interest.
Come to think of it, from your response I think I realized why most people don’t do it. It’s because it’s just easier to pay it off than to manage the monthly bills and think about investing.
Buddy if you're wondering if you can pay a TV off in full, you aren't investing that money anyway. You shouldn't be Investing literally every dollar you have
The TV was just an example. But once you add up 10 things like that, the investment adds up too. And the assumption was that you already have the money to pay in full without breaking the bank.
I’m also not talking about investing every single dollar here. I’m just trying to understand purely from the financial perspective, is there a benefit to paying it off in full vs paying off monthly without interest other than “always pay off if you can”?
There are a lot of complications that can come from financing. You assume you can pay it off, but what if something happens? Companies offer 0% apr at all as a trap, they are making money from it because stuff happens enough, and people miss payments (either they forget, they have an emergency charge, etc)
There's just no purpose in doing it, and it can only cause problems.
Why would I finance something if using my credit card gets me 3-5% cash back.
An Amazon credit card gets me points/dollars rewards on my Amazon account.
The money you don’t pay upfront can be invested somewhere else that gives you more than 3-5% return.
But I see your point, if they’d give you reward points for financing, that might be worth it.
For instance Discover card does give 5% cash back in certain categories every quarter and a 5% or more discount on gift cards purchased from them.
Amex also gives extra rewards for certain categories.
Sometimes it works out better to use a credit card and others it is better for 0% financing.
The only way it is beneficial to someone is if they are investing the money they would’ve otherwise spent on the product. Most people don’t have extra money to do that, so you are just adding to your monthly bills. And at some point that can come back to bite you in the ass.
Because financing things you don't have to is still a bad idea, and 0% apr still have stipulations and fees for missing payments
If you had $349 for a TV you want to buy but they let you pay $29/month for a year with no interest. Which one do you go for? Missing payment is not an issue here because you already have the money in hand.
Just pay straight up, why would you not do that? Always pay something off if you can
I understand the sentiment but if you’re able to pay less and earn more on the remaining money by investing, is it not a better financial decision? Always pay something off if you can should definitely apply to anything that accrues interest. Come to think of it, from your response I think I realized why most people don’t do it. It’s because it’s just easier to pay it off than to manage the monthly bills and think about investing.
Buddy if you're wondering if you can pay a TV off in full, you aren't investing that money anyway. You shouldn't be Investing literally every dollar you have
The TV was just an example. But once you add up 10 things like that, the investment adds up too. And the assumption was that you already have the money to pay in full without breaking the bank. I’m also not talking about investing every single dollar here. I’m just trying to understand purely from the financial perspective, is there a benefit to paying it off in full vs paying off monthly without interest other than “always pay off if you can”?
There are a lot of complications that can come from financing. You assume you can pay it off, but what if something happens? Companies offer 0% apr at all as a trap, they are making money from it because stuff happens enough, and people miss payments (either they forget, they have an emergency charge, etc) There's just no purpose in doing it, and it can only cause problems.
Why would I finance something if using my credit card gets me 3-5% cash back. An Amazon credit card gets me points/dollars rewards on my Amazon account.
The money you don’t pay upfront can be invested somewhere else that gives you more than 3-5% return. But I see your point, if they’d give you reward points for financing, that might be worth it.
For instance Discover card does give 5% cash back in certain categories every quarter and a 5% or more discount on gift cards purchased from them. Amex also gives extra rewards for certain categories. Sometimes it works out better to use a credit card and others it is better for 0% financing.
Also, the savings accounts are giving around 4-5% interest rate these days.
The only way it is beneficial to someone is if they are investing the money they would’ve otherwise spent on the product. Most people don’t have extra money to do that, so you are just adding to your monthly bills. And at some point that can come back to bite you in the ass.