What does “same as cash” mean?
You may have seen financing ads that use the term, “90 days, Same as Cash” for a mattress or used car purchase. Whether you’re in the market to finance merchandise or not, you may come across a “same as cash” offer as you shop around. For this kind of financing, it’s important to know exactly what you’re getting into.
How “same as cash” financing* works
Simply defined, “same as cash” is when a customer uses a store's in-house financing program to make a purchase without having to pay any interest. Individual “same as cash” plans vary, but they mostly allow interest to be deferred for a specified period, if the customer makes the minimum monthly payment. If the purchase is paid off before the end of that period, the interest is never charged, making the plan the same as paying cash.
Term Lengths
With a “same as cash” plan, no interest is charged for a short-term period that could be:
- 90 days
- 6 months
- 12 months
If you make the minimum monthly payments and pay the full amount by the end of the promotional period, you will avoid paying any interest charges.
Eligible Items
A “same as cash” plan is typically applied to big-ticket merchandise. The following could be options for this type of financing:
Whether you need a new couch or want to upgrade your refrigerator, “same as cash” can help you take home what you need right away!
Late Payment Penalty
“Same as Cash” can seem like a good deal, with low payments over a long period of time. All you have to do is make all your payments on time every month according to the agreement.
But what happens if you miss a payment, due to a job loss or other financial hiccup? The thing to understand is that based on the contract the lender can:
- Start charging interest of 18-38% once you stop making payments
- Charge back interest for the previous months
“Same as Cash” Purchase Example
Let’s look at a quick example to illustrate a “6 months, same as cash” financing purchase:
You use in store financing for a new mattress that costs $1,500. The store offers no interest if you can pay the $1,500 within 6 months. That sounds like a great deal, so you sign and take your new mattress home. You make all your payments on time according to your agreement for 4 months and then lose your job. You’ve paid $1,000 toward the total balance. What happens to your payments now? The “same as cash” offer may be void, and the lender now charges 20% interest on the remaining balance as well as back interest. Here’s what that looks like:
Payment schedule
$1,500 / 6 months = $250 monthly payment
$250 x 4 months = $1,000 amount paid
($1,500 original amount - $1,000 amount paid) = $500 amount owed
Missed payment due to job loss
($500 amount owed) + ($1,500 original amount x 20% back interest)
$500 + $300 = $800 new amount owed
New payment schedule after job loss
Without a job, you may only be able to pay $100 every month
$800 amount owed - $100 payment = $700 amount owed
$700 amount owed x 20% interest = $840 new amount owed
As you can see this is a difficult financial situation to get out of as the amount owed is compounded every month by interest. In a “same as cash” offer it is very important to make all your payments on time so that you don’t get into a situation where you simply cannot pay.
Can I finance “same as cash” loans without paying interest?
The short answer is yes. But it’s a cautious yes. It’s important to realize that “same as cash” does not mean there’s not a possibility of having to pay interest. While you can make minimum payments, or sometimes no payments at all, if you don’t pay the entire balance by the term deadline, the consequences can be costly. When this happens, the interest is backdated to the date of the purchase and then added onto your balance. So, whether the “same as cash” plan is for 90 days, 6 months, or 12 months, it’s crucial to pay the balance off before the end of the term period.
How to know if “same as cash” is right for you
Determining if a “same as cash” offer is right for you is based on your own assessment of your financial situation. You will need to do understand the risks and the rewards before deciding.
Financial Uncertainty
“Same as cash” financing may not be the best option for customers who have trouble making their payments. If you have any doubt about the ability to make payments on a “same as cash” offer, the risks may outweigh the benefits.
Financial Certainty
However, if you are certain that you can pay off the full balance during the promotional period, it can be a great, interest-free way to buy now and pay over time.
Final thoughts
If you are disciplined enough to make on-time payments and pay off the balance by the end of the term, “same as cash” can be an incredibly beneficial financing solution. However, if you are unable to make all your payments on time, the financial consequences could be substantial. Read your agreement and understand the interest rate and penalties if you miss a payment. Then weigh the options. If the risks seem too high, don’t sign the agreement. Your best option may be to save money every month and put off buying for a couple months until you can pay the full purchase price. If you simply cannot wait, and need to finance a purchase now, at least you have the understanding to be able to proceed with caution.
*Snap Finance LLC and its affiliates do not offer "same as cash" financing. This article is solely intended as an educational resource.