Have you ever gone into a retail store and seen signs that say “90 days same as cash!”? Or maybe “No Payments and No Interest for 90 Days!”. Whether it is for furniture or electronics, they have all sorts of marketing statements for these kinds of programs. You look at this offer and think that it is a deal. And if you took business classes they probably taught you to use OPM, Other Peoples Money. However, the truth is that 90 days is not the same as cash and here is why:

1. 80% of people that apply for the 90 same as cash do not pay it off within 90 days. This means that if you do not pay it off within this time period you will not only begin to be charged interest rates above 20%, but you will have to pay back interest as well. Here is a brief example:

You buy a TV and surround sound system for $4000 on 90 days same as cash. You are not able to pay it off in time and therefore you pay 24% interest which includes interest  for the first 90 days. Lets say you pay it off in 12 months. You end up paying $4,960 for that TV! This is $960 in interest for something that you thought would be the “same as cash.”

2. If you took actual CASH to the Electronics store, they sometimes take less than the asking price. So if you took in $3,700 for that same setup and tell them that you are willing to buy today, chances are they will make the deal happen. I know of a couple stores in our state, Ultimate Electronics and Spencers, where they are willing to work with you.

So compared to 90 same as cash, it seems like just saving up and paying cash for it would potentially save you $1260.

One last thing. Let’s look at the opportunity cost of 90 days same as cash. If you were to pay cash instead and invest the savings in a mutual fund that grew at an 8% annual yield for 40 years; you would have $30,584.12! I hope you can drive you TV out of the electronics store for that price.