This is a guest post from Mr Credit Card of www.askmrcreditcard.com. Today, Mr Credit Card is going to talk about why cheap stuff and deals may not be the best thing. In case you are curious, one of his favorite credit card issuers is Discover credit card and he also recommends checking out the SPG Starwood Preferred Guest program.
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Lots of folks in the personal finance blogging arena tell us about deals and generally recommend products that cost the least. But from my experience, lots of low price and teaser deals have a hidden cost. Below are some examples I've experienced in real life.
Cheap, but product is out-of-date - Electronics retailers love to lower their prices on Black Friday. Consumers constantly seek out electronic gear during Black Friday and the holiday season. I have found that one has to be very careful when buying electronics on Black Friday. Most electronics retailers sell stuff they want to clear on Black Friday. That means they are selling old models. There is nothing inherently wrong in selling old models, but one of the problems I have encountered is buying an old laptop that had "new software" installed on it. If you looked at Black Friday 2009, there were a lot of laptops going for under $200. Yes, under $200. But the problem was they had Windows 7 installed on them! Unfortunately, there wasn't enough memory in those laptops to really run Windows 7. Folks who bought those laptops would be shocked that they took so long to boot! When they add Microsoft Office and a Norton Security Suite, they will find their new laptop runs like a snail! Additionally, many Black Friday deals lure you to buy a product and then the product does not work until you buy additional software!
Deceptively cheap but with hidden costs - About 18 years ago I was backpacking in New Zealand with Mrs Credit Card. We had to rent a car to drive in the South Islands. We searched for the cheapest deal and went into the rental shop with the cheapest price in their window. We decided to sign up and get the paper work done. But as we signed the papers, we found that there were additional costs. The "cheap price" was the basic deal. Costs like sales tax and collision insurance were not covered. After all the costs were added up, we actually paid more than we would have had we used a different company with a higher advertised price.
The same thing can happen with 0% financing. Check the fine print. It is not uncommon for furniture stores to offer 0% financing and no payments for 36 months. But if you have not paid the item off in full by the end of the 36 months, the interest on the 37th bill can be as high as 29% and the interest charges apply retroactively!
Shopping at Going Out of Business Sales - I once bought a dozen pair of shoes from a shoe shop because they had a closing sale. I really thought I had a great bargain. Many cost just $15! Guess it was too good to be true. Most of the shoes that I bought there either broke or tore within a month of wearing them (and I'm not kidding). I bought a few mocs and within 3 weeks, the side on the outside part of the foot had a tear. The same thing happened time after time. I guess it is no surprise that the shop closed down. They were selling crap products!
Be very careful when you are shopping at store closing sales.
Deals whose terms may change - Ha! This is my area. See all those 0% balance transfer deals. Well, when you get one of those cards, typically the minimum payment required is about 2%. But those terms could change so easily! They could raise the minimum to 5%. For some, that could literally mean doubling your monthly credit card payments! You could lose your reward points you have accumulated if your card is closed for some reason by your credit card issuer. You could even have your credit limit drastically reduced. Sometimes I think it is better to get a charge card with no preset spending limit and pay the bill in full every month even though it has an annual fee.
Obviously not all deals are bad. Here are a few types of deals that I found to be legitimate without any hideous fine print. Supermarket coupons are the most obvious example. There are no catches with these. Present them and you get your discount. Store coupons work the same way. I find that local business coupon booklets are mostly a pretty good deal. I've taken advantage of restaurant coupons just to check out a new place, or got a coupon that allowed me to pay for one ski ticket and get one free during the weekdays.
One way not to get suckered into bad deals and sales tactics is to only respond to them if you have done research on the product you are buying and really know if the deal is good or not. For example, if you have researched a digital camera you want to buy and a sale comes along on that one, you can confidently take advantage of the sale. Contrast this to someone who just buys it because it is on sale without knowing if it will be suitable for him or her. This is one instance where procrastination actually helps!
Everyday we are bombarded with supposedly good deals. Many such deals have fine print that is not disclosed. We either waste a lot of time or are suckered into getting something that we should not have gotten. Look at deals with a wary eye to protect yourself.
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