Can you find holiday cash in the car seats?
By Susan Tompor Detroit Free Press
Published: Saturday, Nov. 24, 2012, 8:57 p.m.
Here's a money-saving thought: Can you find holiday cash in the car seats? No, not just a few stray nickels and quarters.
Different ways to create holiday jingle are popping up - finance deals, credit cards and yes, even some car loans.
Wal-Mart is running a zero-interest-for-18-months promotion on electronics bought for $429 or more for customers using a Wal-Mart credit card at the stores through Nov. 30.
Ford Credit has sent selected customers offers to skip the next monthly car payment to create extra cash in their wallets.
But before saying “Hey, where do I sign up?” it's smart to dig deep into the details.
My niece received a few offers. Her credit union had a plan to delay loan payments but it had a fee of $30, so she said forget it.
The finance company for her car loan offered a way to defer payments for one month. No fee. Before she jumped, she stopped and wondered: How is this going to hit my credit report?
Many consumers are similarly skeptical.
“Their first question is, ‘How is this going to impact my score?' ” said Dorothy Barrick, financial counselor and group manager for GreenPath Debt Solutions, a national nonprofit credit counselor based in Farmington Hills, Mich.
Experts say that accepting an offer to defer a monthly payment — not just skipping a payment on your own - shouldn't affect credit scores. It should not be reported to a credit reporting agency.
But consumers must consider what action might lead to lower credit scores. Lower scores mean you could face higher interest rates ahead if you apply for a mortgage or other loans.
Obviously, no one should just stop making a payment — as a missed payment does ding a credit score.
Todd Albery, CEO of Detroit-based Quizzle, a credit-information website that's part of the Quicken Loans family, said consumers could take an extra step and directly ask the company making the offer to specify, in writing, that this deal will not negatively affect the consumer's credit.
When it comes to zero-interest financing deals, like appliance or furniture offers, credit scores could take an initial hit if you wait to pay them off until the end of the interest-only period, Albery said. Albery noted that you could end up creating a “revolving account” when you agree to a limited, zero-interest promotion for a year or 18 months. The balance owed would likely be high. Once it is reported to the credit bureaus, it could contribute to a drop in a credit score.
Once that purchase is paid down or paid off, he said, the consumer's score could rise again.
For many consumers, some deals create flexibility in a budget. But you must consider how you're going to spend the extra money, too.
“If you're doing it just to blow that money without working within your budget, that's not a good thing,” Barrick said.
Look at the fees, too.
If you'd pay a fee of $30 to avoid a $150 monthly payment, you're only freeing up $120 for one month and it's not worth it.
Look at your interest rate. Think of an extended payment as stretching out a car loan. It's better to extend that car loan with a rate of 5 percent than borrow an extra $400 or so on a credit card with a 15 percent rate.
Ford Credit is running a one-month extension promotion nationwide. The deal is being offered to qualified customers only and it could have a nominal extension fee, said Margaret Mellott, a spokeswoman for Ford Motor Credit.
The fee would depend on what's allowed in a specific state. Some states, including Ohio and Illinois, do not allow fees.
Mellott said a fee typically would not exceed $25.
Ford confirmed that if a consumer accepts the chance to defer a car payment for one month, there is no effect on the customer's credit score. Again, you'd need to qualify for the offer and accept it.
As for those popular zero-interest offers, experts say watch out so you won't be tempted to spend more to qualify.
The Wal-Mart deal applies only if you buy the electronics on a single receipt but you can buy several electronics items to hit the $429 or more in a Wal-Mart store. It is not valid online. Consumers also must use a Wal-Mart Discover card or a Wal-Mart credit card.
Some no-interest deals, including the Wal-Mart electronics offer, require a minimum payment each month before that promotional period ends.
Here's another kicker: Interest would be charged to your Wal-Mart account from the date of the purchase if the promotional balance is not paid in full within 18 months.
Pay attention to what you need to pay off — and when it needs to be paid. Know what interest rate you'd be charged, if you don't pay off that balance in time.
A temporary break for your budget does not mean that you can ignore the limitations of your budget. At some point, you've got to pay the holiday bills — and everything else.
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