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Buy now, pay later! Are these deals for you? -- Page 2

Thirdly, make sure the deal applies to the product you're interested in. "Consumers should compare prices and quality of the merchandise," says Adkins. "Make sure they are getting the best possible price. At some stores, these types of offers may apply to certain products, but not others -- and for different periods."

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Oh what a deal!
If the working assumption is that these kinds of incentives are scams, should consumers stay as far away from them as possible? Not necessarily. In some cases, and for some people, these can be terrific deals.

"First off, you should look at your own circumstance," says Seaton. "Is this an item you want? If I want it, what is my financial circumstance going to be? How can I improve my financial circumstances in the six to nine months that it's going to take me to acquire the money to pay this all off? If I think it's going to be any different, then I might want to think about not doing it. If it's going to be positive, then I might want to do it."

If you as a consumer have good credit, cash in the bank, and control of your finances, it might be a good route to take.

"It's actually an excellent idea if the consumer is disciplined," says Lynch. "They might get a thousand-dollar refrigerator, and if it's paid off in a year, they're not going to have to pay any finance charges. They tell themselves that they're going to pay a hundred dollars faithfully for 10 months before that year is up. Certainly it's a great thing to be able to do, but you have to have the discipline to do that."

Prioritize your purchases
That plasma TV would look pretty great hanging on your wall, wouldn't it? Nothing wrong with wanting it, except of course that it's very expensive; and approximately the same price as a vacation for a family of four, to Disney World, for a week including airfare. The local appliance broker is offering a deal, though. Buy it now, and for the first year, you pay no interest. Should you make the leap?

If this TV costs $7,000 and you just can't afford a $7,000 TV, then maybe this isn't a deal you should even consider. Buy the 32-inch regular TV for $400 and don't run yourself into debt.

But maybe you're expecting a year-end bonus from your job that will be about $4,000. That would enable you to make the interest-free payments until then, and then pay off the TV when the bonus comes in.

What if the year-end bonus is only $3,000 and you can't pay it off completely? Will you still be stuck making high interest payments? Read the agreement carefully. How large will your payments have to be that first year?

"Consumers should keep in mind that credit costs money," says Adkins. "While delayed payment plans allow you to purchase what you need or want when you do not have the cash upfront, you usually end up paying more for the merchandise when you buy it on time."

Use a pragmatic approach
Perhaps the best way to approach this is to modify your personal spending philosophy. Instead of thinking of this purchase as an item for yourself, think of yourself as a corporation -- YOU Inc.

"Think of yourself as a small business," says Seaton. "What is the rational way to approach this transaction? View the transaction the same way you would something in your job -- much more rationally than people do. And these particular deals, you really have to look at them with that kind of hard-eyed focus, rationally."

A careful inspection of your balance sheet, displaying your assets and liabilities, can help you make a decision about whether that purchase is good or bad for your bottom line.

Mark Terry is a freelance writer based in Oxford, Mich.

-- Posted: July 29, 2005




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