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.
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.
You can apply for the Capital One Venture Rewards credit card here.
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.
You can apply for the Bank of America Cash Rewards Credit Card here.
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?
Related: Free Credit Score Simulator With Chase Credit Journey
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.
Dev
Saturday 27th of March 2021
These are fair points, but financial advisors/columnists tend to live in a bubble. You're basically stating ideal, but that's just not reality.
It depends on the interest rate, and other personal factors. Yes, ideally, you shouldn't finance furniture. But if you are paying interest, you're paying for the luxury of not having an empty and depressing home whilst you save to pay in cash. The reality is people need couches.
The bigger concern with 0% financing is that the furniture is outrageously priced, and all the interest will kick in if you don't pay the full amount in 24 months or whatever the time interval is. And furniture stores are notoriously sneaky with that. They'll say no interest if paid in 24 months, but set the payment term to 30 months, real sleezy. I'd buy from a discount store or overstock, wayfair, amazon, etc. to get rid of sneaky junk and commission costs.
If you do need furniture now, yes ideally save, but just budget appropriately, and keep in mind you'll pay a fairly high interest rate. Wayfair is 20% as are most credit cards. So ideally, you can make significantly more than the the minimum payment each month so you don't get hit with all that interest.
i.e. If you have 2k in furniture needed, but won't have the cash for 3 months, that's about $100 in interest, provided you pay it all in 3 months. Not a very big expense for the advantage of having a place for your friends to sit, and for you to, you know... sleep.
Debt is a tool, not an evil, just depends how you use it.
Joanna
Saturday 21st of November 2020
This is a bit much. Financing at 0% interest is a valid way to get things you need now (not 5 years from now). If I need a bed to sleep on and a store is offering 0% financing for 36 months, I could either get what I need now, divide the total cost by the number of months they are offering 0% interest, and set aside that amount in my budget...or I could set aside that amount in my budget to save for those 36 months and finally buy the furniture at the end of that time period. Either way, you need to set that money aside and won't be able to "spend it on other things", but at least with financing you get what you need when you need it. Obviously, it isn't something to jump into on impulse and you need to be responsible about it and still consider the total cost and what your necessities are. I agree that if you don't need the item it might be better to wait and if you have the money it might be better to pay cash (although if that leaves you without an emergency fund, financing still might be a more viable option). But some of your "alternatives" are even worse. I mean, opening a credit card with a 15 month 0% interest period? That's the same as financing with the store, only now you have less time to pay it off. With a shorter promotional period you are less likely to pay off your debt before your interest skyrockets. That is way less responsible than a 36/60 month 0% interest financing through one of these furniture stores. I can only assume you have some kind of deal with these credit card offers you're advertising. And to tell people that if they need a longer financing time period then they just "can't afford it" is very entitled of you. Financing makes it possible to afford it, though your credit may be affected, but not everyone has the luxury of paying cash, and there are ways of doing this responsibly. But for you to start out by telling people one way of financing is not valid and then steer them towards ways to potentially get into more debt is very misleading. You could also advise that if you do plan on utilizing a store's 0% financing, you don't have to mention that while negotiating the price. Get the best deal you can, make responsible decisions about what you need, and budget accordingly.
Paul
Saturday 2nd of June 2018
Yes, I realize this is old. Going from one extreme, as in living beyond your means to living below your means doesn't help the economy much, but I suppose one will always have cash in hand for an emergency. When I was younger, I fell prey to debt like a lot of young people did. It took a while to wise up, but I try not to carry any credit card debt, and only carry an auto loan and mortgage, along with some old student loans I'm still paying off. What some people seem to not care about, others do, however. I like to have a nice home and if I did need to finance a few pieces of furniture, I might, because that's important to me. It may not be to you, but it is to me. Everyone going willy nilly and running up credit cards on frivolous purchases is where I draw the line. I work hard and I will enjoy my life, without going into debt, but I will use what I have, since in the end, I cant take it with me either.
Lance Cothern
Sunday 3rd of June 2018
It's definitely a personal decision. However, you can still have a nice house by purchasing quality used furniture on Facebook marketplace and craigslist, too.
Alice
Tuesday 27th of February 2018
As long as you're smart enough to divide the total cost by the amount of months allowed by the financing, and can therefore do a simple budget to find out if you have enough to make that payment every month, and are certain you will make that payment every month, there is nothing wrong with financing furniture. If however, you know you are consistentenly living beyond your means, walk the other way until you have enough in cash. We've financed furnature, lawn and garden equipment and more probably 4 or 5 times in the past 10 years. We've never paid one penny in interest. In fact, we usually pay it off months early. You need to stop hollering "pay cash or nothing!" seriously man. Tone down the chastising preaching. If you really want to help people, you should teach others about how financing works and how to do it right. If you can manage to lower yourself down to our level.
Lance Cothern
Tuesday 27th of February 2018
How does one know where living beyond their means starts? If you can't pay cash today, you aren't living within your current means and are borrowing from your future. While I totally agree that financing furniture at 0 percent can work and people can budget for it and pay it off without paying a penny in interest, what happens when something goes wrong. When you lose your job, get disabled or have something else happen that takes away the income you planned to use to pay off the furniture? You can no longer afford it.
I want to help people live within their means. They can choose what they determine their means are, but to me it is living within the cash you have today when it comes to consumer good like furniture. As far as teaching people how financing works, I share plenty on that topic and about the dangers of paying high interest rates on debt. If you make a late payment, you can sure bet that 0% financing rate is going to pop up higher.
Kim
Friday 23rd of February 2018
I had to purchase a new sofa a few years ago- gave mine to my son for his first home. I purchased my sofa at Pier 1 Imports using their credit plan because if I put the purchase on their credit card, I got $200 in free merchandise. I used that $200 to purchase my Christmas gifts that year and paid the sofa off a couple weeks after purchasing it paying no interest but getting $200. I also purchased the sofa on sale so I feel I got a great deal.
I don't worry about my credit score because I don't plan to get a loan for anything major like house or car which are already paid for. I had the cash to pay for the sofa but why not take the $200 they were offering.
I just purchased a high end coffee table at a thrift store for $45. It is in perfect shape and probably sold for $445 when new.
I have also used the 0% furniture store plan when we purchased our first home 25 years ago. I purchased a high-end dining room set. Again, I had the cash to pay on the spot but wanted to keep that cash in case we ran into some issues with the house which luckily we didn't so I was able to pay it off long before any interest kicked in and by the way we still have that dining set and it is still in excellent condition.
So , I have used a combination of ways to make my furniture purchases but the important thing is to never pay interest. Do what works best for you and your family. Make your home a comfortable place where your family can de-stress and enjoy life.
Lance Cothern
Tuesday 27th of February 2018
Avoiding interest is definitely a big key. Personally, I love the idea of living below your means, too.