Tips on identifying a good deal
Discounts, rewards and special financing can be tempting, but how do you spot a real bargain? Consider these four common "bargains". They could save you money - or cost you.
1. Buy now, pay later.
Retailers often get you in the store with offers of no money down and no interest for several months. Depending on the offer, this may be a great deal if you manage to pay off the purchase within the contract period. However, if you don't pay it off by then, be aware that the finance company may apply interest retroactively, depending on the terms of your purchase. The added interest fees may wipe out all your savings on the purchase. To ensure you save money with this deal, read the fine print in the buyer’s contract and make sure you understand the interest rate, penalties or handling fees, and when payments are due.
2. Store credit cards with discounts and rewards.
As you're about to pay for your purchases, the store clerk makes a tempting offer: sign up for a store credit card to qualify for discounts, rewards and special offers. Before applying, keep in mind two drawbacks to store credit cards: the APR may be higher than other credit cards, and the credit inquiry will be noted on your credit report and may lower your credit score. To get the discounts or rewards without the high interest payments, pay your balance in full by the due date. Another option is to use one of your own credit cards that offers rewards.
3. Warehouse club memberships.
Pay to shop? Sure, say the people who pay an annual membership fee of $35 to $100 to shop at warehouse stores. On the positive side, you can save both time and money by buying in bulk. However, it can be tempting to purchase more than you can use quickly or safely store, especially if you're trying to save enough to justify the membership fees. Consider your family size, your shopping and cooking habits, and how much storage space you have before signing up for club memberships. And find out if you can get a free trial membership to check store prices before you commit.
4. Extended warranties.
Stores often ask if you want an extended warranty for your new laptop, dishwasher or fridge. Some people value the peace-of-mind they provide, for example, if they're buying a product with a track record of breaking down. But keep in mind that retailers can only afford to offer extended warranties because they make more money from selling them than they spend honoring them. As an alternative, look for products with good manufacturer warranties, shop at stores with consumer-friendly return policies, and check if your credit card offers extended warranties and purchase protection.
The key to identifying a good deal is to read contracts carefully, ask questions of store staff, and be realistic about how you'll pay for it. No matter how low the price, it's not a real bargain if you can't afford it.
What's next? Becoming a bargain hunter