Every time I drive by a furniture store I see a sign hanging in the window that says something like “THIS WEEK ONLY – 60 Months 0% Financing”
I’m always amazed how these interest free financing offers for furniture are for a limited time. The stores always seem to be running them.
Maybe the furniture stores offering 0% financing just change the length of the offer. This way, the current sale is actually only for a limited time.
So how do you know what the best furniture financing deals are?
The fact of the matter is, it doesn’t really matter how long the furniture stores with zero percent financing are offering financing on their furniture for. Why?
You should never finance furniture, especially if you couldn’t pay for it in cash today.
Should You Finance Furniture? NO!
Furniture is a consumer good and, as you know, I am completely against consumer debt.
Consumer debt allows you to buy things today even if you can’t afford them. Instead, you borrow the money from the future you. Then, you pay banks or other lenders interest for the pleasure of stealing from your future self.
Financing furniture, even without paying interest, still steals from future you. Why?
Every debt payment you make on that furniture is money you can’t use for something else. If you paid cash for the furniture, you wouldn’t have to make those furniture financing payments.
Instead could use the money for something else, like saving for your retirement.
Furniture can be expensive and furniture stores like Rooms to Go know that. By dragging out the price of the furniture into monthly payments with no interest, it makes the furniture seem cheaper. This might cause you to end up spending more than you had planned.
Furniture stores know that any discount they give would only be a few dollars a month at most if you finance over a long period of time. Due to that fact, they’re not going to offer great discounts to try to get you to buy.
Instead, they’ll waive the monthly payment in front of your face. Clearly, this is a better way to afford the furniture according to salespeople.
Paying For Furniture Without Furniture Store Financing
Thankfully, there are plenty of ways to pay for furniture without financing it at the furniture store. I like some of these ways better than others, but every single one is better than financing your furniture at the store on the spot.
If you’re going to finance furniture regardless of whether it’s smart or not, here are the five best ways to finance furniture.
Paying Cash For Furniture
Paying cash for furniture is ideal. You know you can afford to make the purchase or at least you won’t go into debt for it.
What’s even better is you no longer have to search for the best place to finance furniture.
While I say cash, you can pay by check or even by credit card. The key is having the money in the bank to pay your purchase off in full as soon as you get the statement.
It may seem impossible to pay for your furniture with cash. It’s not. It just takes some dedication to save for what you want. In fact, we just bought a bedroom suite in cash last month.
There is a super easy way to make this happen, even if you’re not good at saving money.
How To Pay Cash For Furniture Purchases
First, you need to open up an online savings account so it’s harder to get to the money quickly. This will prevent you from dipping into your savings account at the first sign of temptation. You can do this at CIT Bank. Read more about CIT Bank and how to open an account in our detailed review.
The online savings account will still be easily accessible, it will just take a day or two to transfer the money to your checking account rather than the instant transfer at your current bank.
Once you have your online savings account open, set up a recurring transfer from your checking account to your new savings account.
Another way to do this is by setting up a payroll deduction at work to deposit a set amount of each check to the savings account.
Either way, the goal is to make your savings transfer automatic. This way, you can’t stop it without some serious legwork. Again, it prevents you from the temptation of raiding your savings for impulse purchases.
Once your savings account hits the target amount, head to the furniture store and start shopping for the furniture you want.
Other than the fact you won’t go into debt, paying for furniture without using furniture store financing helps you because it allows you to have the upper hand at furniture stores that negotiate on price.
If you let furniture stores know you need their financing to complete the transaction, they’re less likely to negotiate.
They know you can make the purchase at full price if you’re approved for their financing.
However, you hold the cards when you’re paying cash. Say all I can afford is “whatever amount you determine” and I’m not taking out debt to make the purchase. Salespeople may be willing to give you a slight discount to make the sale.
After all, many salespeople work on commission. A smaller commission from a reduced price is better than no commission at all.
Get Money Back Using Credit Cards Then Paying Them Off In Full Immediately
You can automatically get a discount when paying for furniture by using your credit card. If you have a cash back credit card, you earn cash back on your purchase. Some of the best credit cards offer at least 2% cash back.
If you want to make even more, consider signing up for a sign up bonus credit card. Then, use the furniture purchase to meet the minimum spending requirements. You could easily make $400 this way.
For instance, the Capital One Venture Rewards credit card offers a 50,000 miles sign up bonus for spending $3,000 in the first three months of card membership.
You can use those 50,000 points for a $500 travel statement credit.
There is a $95 annual fee that applies, but the fee is small compared to the bonus you can earn.
Just make sure you pay the furniture off in full when your first statement comes.
Using 0% Promotional Interest Rate Credit Card Offers
If you’re going to finance furniture, and I don’t recommend it, at least do it in a smarter fashion. Furniture store financing spreads out payments over years. It gives the furniture store the upper hand.
If you need to pay for your furniture over 36, 48 or even 60 months, don’t even bother. You can’t afford it.
That said, there is another option if you’ve got some money in the bank or you can afford larger payments.
It still isn’t smart to finance furniture, even using this method, but it’s better than using multi-year furniture store financing.
Most credit cards that offer a 0% promotional interest rate on purchases only offer the period for a few months to as long as a year and a half.
For instance, the Bank of America Cash Rewards Credit Card offers 0% intro APR on purchases for 15 billing cycles.
Additionally, you can earn a $200 cash rewards bonus after you spend at least $1,000 on purchases within the first 90 days of account opening.
If you use this method, you absolutely must pay off the purchases in full before the promotional period expires. Otherwise, you’ll easily pay double-digit interest rates on any remaining balance.
You also need to make sure you never make a late payment or default in any other way. If you do, your promotional interest rate could expire.
Remember, you have the upper hand in any negotiations if you head into a furniture store with the credit card in hand, already approved.
Before you head into the store, calculate how much you need to pay each month to pay off the furniture you want. Make absolutely sure you can pay it off before the promotional 0% rate expires.
Ideally, make sure you can make double the monthly payment necessary to pay the debt off just to be safe.
It’s important to pay the credit card off as fast as you possibly can. Make triple or quadruple the necessary payment to pay the card off before the promotional period expires, if possible.
Don’t wait one day longer than you have to.
Skipping Your Furniture Purchase
Finally, if you want to pay for your furniture purchase in cash but just don’t have the money available, simply skip the purchase for now.
The furniture stores will be there next month, next quarter and even next year. Take this time to save up for the furniture you want.
If you really want it, saving should be easy. Make your furniture savings the number one priority in your budget and make it happen.
But Can’t You Make Money With 0% Interest Offers?
Some people may argue you can make money by buying furniture with a 0% interest offer. In some ways, they’re right. It is technically possible, but the risk is worth more than the reward in most cases.
Here’s how it works. You have the cash in the bank to pay for your furniture, but instead you take out a 0% interest loan or promotional credit card offer, like the Bank of America Cash Rewards credit card.
You leave the cash in a savings account earning interest or use the cash to make money in other ways while you pay your 0% interest loan off as slow as allowed.
Over the life of the loan, you’ll get to keep the interest or other earnings on the money that you would have spent on furniture if you paid cash. You also get the furniture for the same price.
Unfortunately, it takes a lot of self-discipline and a bit of luck to make it come out in your favor. That’s why I don’t recommend using 0% interest offers to make money through arbitrage for most people.
One slip up and you’re out the cash to pay for the furniture. You still have to make the monthly payments on the debt each and every month, too.
First off, if you miss a payment on your no interest furniture loan, you’re likely going to pay a very pretty penny.
Your interest rate will likely spike from 0% to 20% or more. In some cases, that interest rate could be applied retroactively to when you purchased the furniture.
It’s a very expensive mistake to make.
Does Financing Furniture Hurt Your Credit?
If that isn’t bad enough, buying furniture on a 0% promo could potentially hurt your credit score.
If you apply for a furniture loan at the store, chances are your credit line will be the same exact amount as your purchase. Usually, this won’t be the case if you apply for a credit card with a 0% introductory APR on purchases.
Having your credit limit match your purchase is bad. It means your credit utilization on that particular debt will be 100% or essentially maxed out.
Credit utilization is part of the amounts owed portion of your FICO score, which makes up about 30% of your credit score.
It’d stink to have your credit score drop if you’re just trying to use arbitrage to earn a few bucks in interest. I’d hate for a 0% furniture loan to end up causing you to have a higher interest rate on a future mortgage.
It could cost you thousands, if not tens of thousands of dollars, while you’ll only save a small amount on your furniture arbitrage.
So how else can you get furniture if you don’t have the money to pay for new furniture in cash and you’ve smartly decided not to finance your furniture purchase?
Easy – Craiglist And Facebook Marketplace
Take a look on craigslist or Facebook Marketplace. Here, you can try to find a piece of furniture that fits your style.
You could easily save hundreds or thousands off what the original owner paid at the furniture store if you do a bit of research to make sure you’re buying quality furniture.
Yes, it might have some scratches or other blemishes, but that’s fine.
You would have ended up damaging it in some way anyhow. Now you don’t have to worry about it. Someone else already scratched it for you.
To top it off, you ended up saving money and didn’t end up in debt.
Honestly, buying used is even better than buying furniture at a new furniture store even if you can afford to buy new. The key is being patient enough to find the right pieces of furniture.
I want to know about your furniture adventures. Have you ever gotten a cash discount at the furniture store? Have you ever scored an amazing deal on craigslist or a yard sale? I’d love to hear about it in the comments below!
Lance Cothern, CPA holds a CPA license in Indiana. He’s a personal finance, debt and credit expert that writes professionally for top-tier publications including U.S. News & World Report, Forbes, Investopedia, Credit Karma, Business Insider and more.
Additionally, his expertise has been featured on Yahoo, MSN, USA Today, Reader’s Digest, The Huffington Post, Fast Company, Kiplinger, Reuters, CNBC and more.
Lance is the founder of Money Manifesto. He started writing about money and helping people solve their financial problems in 2012. You can read more about him and find links to his other work and media mentions here.