Back in October 2008, one SavingTools writer had a great idea: Get free money by using interest free offers on major purchases and investing the cost of the purchase in a CD. At that time, it was common for furniture stores, home improvements stores, and electronic stores to offer big ticket items like couches, plasma televisions, and appliances on a 12 month, no interest plan. The economy was slouching and they had to do something to pull in consumers.
Back then, the 4.8% 12-month CD rate meant you could take the money you were going to spend, and put it into a CD, and pocket the interest earnings. A $5,000 purchase would net you $209.72 worth of interest. It just goes to how you how much things have changed...
Fast forward to 2010
Well, CD rates aren't quite what they were back in 2008. In fact, they are less than half of what they were, now hovering around 1.8%. And don't get me started on interest-free deals. You're lucky if you can get six months, if any at all. And that rate is even lower at around 1.4%. Add to that the fact that you must make minimum payments that are later credited back to your account only after you pay it off on time, and the gains are even lower. You must be VERY careful not to miss a payment or make the final payment before the free-interset period expires, or it could end up costing you money. It's looking less and less appealing now isn't it?
Today's advice: take advantage only if you have full confidence that you can and will pay it off on time!