So a couple of weeks ago I bought a new mattress, and as we started talking pricing and terms the salesman said they offered interest free financing if you qualified. Went about my business, made my pick and sat down to sign on the dotted line. I asked about the terms around the 0% interest: no early pay off penalty, no up front cash discount, basically no strings I could find for the line of credit so I said hell yea i'll take 48 months interest free credit on this purchase I would have paid cash for otherwise. But then I couldn't help but ask him how they made any money on these financing deals. The store owner? chimed in at this point and said something to the effect of the bank that the financing is through offers the deal to incentivize customers to open new accounts with them.
my question to you all financial geniuses is, could this really be the entire explanation? people get these new lines of credit and then spend on them or start opening other services with the bank? I look at it and see free money to me which can't be, they have to be making money somewhere.
my question to you all financial geniuses is, could this really be the entire explanation? people get these new lines of credit and then spend on them or start opening other services with the bank? I look at it and see free money to me which can't be, they have to be making money somewhere.