Monday, December 26, 2005

Sneaky bastards

In America, we mostly celebrate our holidays in one of two ways, namely by getting drunk or by buying a lot of stuff. I don't drink, and I'm not usually very much into the whole consumption thing, so I often feel somewhat alienated during our national holidays. Last month, though, for the first time ever I went shopping on "Black Friday," the day after Thanksgiving. (For those of you who don't live in the States, that's the big day for sales here. We celebrate Thanksgiving by stuffing ourselves beyond repletion with mass quantities of stuffed poultry, and then we celebrate the day after Thanksgiving by purchasing mass quantities of discounted consumer goods. Although the exact connection escapes me at the moment, all this is in recognition of our Pilgrim forbears, who were rescued from starvation by their Indian friends until such time as they were ready to engage in genocidal war against them. But I digress.)

I needed a new computer, and I was going to spend about $1,200 to get a good one on-line, but I saw that Circuit City had a decent one -- not as good as I'd planned on, but decent -- for about $600 (after rebates). Basically, I'd be getting the monitor (a 17-inch LCD, which would run at least $230) and a cheap little printer ($60) for free. Not only that, they were advertising "18 months with no interest."

So I head down to Circuit City at about 4:45 a.m. -- because for some reason all these sales start at like 5:00 a.m. -- and the line stretches across the front of the store and all the way around one side. (This is a really big store, mind you.) At this point, I'm ready to turn around and go home, because I hate to wait in line for anything. But I'm going to be saving about $300, or even $600 if I figure in what I'd been planning to spend. That's a lot of money to me either way, so I decide to suck it up and wait. So I get in line, and at 5:00 a.m. it starts to move, and it's pretty orderly – there's none of the pushing and shoving and trampling you sometimes see on TV.

I get inside, but just because Circuit City has approximately 40 times the usual number of people in the store, apparently that's no reason to open up any extra cash registers or anything like that. That might cut slightly into profits, and for what, customer convenience? Perish the thought. No, it's business as usual, and everyone who wants to buy a computer is supposed to get in this one long line, so I do. There's actually only about 14 people in front of me. Today's biggest promotion is get a free (after rebates) laptop if you sign up for two years of AOL. The laptop is pretty crappy, and I'd pay more to not get AOL than I would to get it, but the line in front of me consists of about 12 people who lined up at Circuit City at 4:00 a.m. to get a free (after rebates) laptop and 2 people who know anything about computers and want the same one I'm getting. The three of us pass the time by sneering at the free (after rebates) laptop/AOL people.

Fourteen people doesn't sound like many, but signing up for AOL apparently requires submission of a credit card, a complete credit check, and the signing away of parental rights to your firstborn child, because it takes like 15 or 20 minutes to process each free (after rebates) laptop/AOL customer and send him or her on his or her way with a crappy computer and a contract for two years of indentured servitude to AOL. It takes 5 minutes each for my fellow non – free (after rebates) laptop/AOL customers to make their purchases.

Finally, at about 8:00 (seriously), it's my turn. I tell the guy what I want and ask how to get the 18 months with no interest. He says I have to have a Circuit City credit card. Of course, I don't have one, so I ask how do I get one. He says go to the customer service counter and apply for one. He gives me a voucher, so if my application is approved I can get my stuff right away. So I go to the customer service counter, where, naturally, there's a line of people waiting to sign up for credit cards and get 18 months with no interest. I fill out the application while I wait, sneering at the occasional customer who walks towards the exit with a telltale laptop.

At last, it's my turn. I'm processed without a hitch. It turns out though, that I'm not just getting a Circuit City store card, I'm getting a Circuit City/Chase Visa card, with an $8,000 line of credit. The idea, apparently, is that I'll run up big bills on the Visa, while Circuit City gets a percentage. Yeah, right. I use my new credit card to pay $1,049 for my new computer, monitor, and printer that will eventually cost around $600 after rebates. I walk out of the store at 9:00 a.m. with my equipment and the eight receipts I need to get my rebates. It's the only time I'll use that card, at least until I need something else from Circuit City with 18 months of no interest payments.

But have you ever wondered "Why rebates? Why don't they just give a discount?" I think the answer is pretty obvious. The stores and the manufacturers hope some customers will forget to send them in, or lose their receipts, or fill out the forms wrong, or throw away the boxes with the "original UPC codes," or whatever. They're trying to trick people into thinking they're getting discounts that they end up not getting.

And the "18 months with no interest"? Another trick. Take a look here:
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See where it says "Accumulated Deferred Finance Charges"? What that means is if I haven't paid off the whole $1,049 within 18 months, I owe them 18 months of interest. That's right. If I haven't paid off the balance, interest doesn't accrue beginning when the 18 months are over, it's been accruing the whole time, so all of a sudden I owe them another $200 or whatever. Now, they do say that in the fine print, so no one can say they didn't warn them. It's all perfectly legal, of course.

And here's another lovely bit of trickery. If you divide 1,049 by 18, you get 58-point-something. So my monthly minimum payment should be about $59, right? Uh-uh. Take a look at this:
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That's right. The minimum payment is $27, not $59. They deliberately try to guide you into not paying off the balance in time to avoid the big interest payment, the sneaky bastards. Well, I'll have my balance paid off before then, so it won't hurt me. But making money by tricking customers used to be the province of sleazy, fly-by-night operators. I wonder when it became standard procedure for major corporations like Chase and Circuit City.


  1. I am actually afraid of companies like this. Of course, my new, lower APR CC (the one I'm trying to pay off) is Chase.

    The whole industry frightens me. I agree, absolutely, with your assessment!

  2. I have long known this stuff about these places that give free interest. Sometimes, I already have the money in the bank gaining interest so I purchase the 18 month same as cash item and then pay it off pretty darn close to the date it is due.

  3. I'm reading a great book about this sort of stuff, called Short Changed.

    There's a whole lot of ways that companies try to take advantage of people who live on the fringe, surving (or living above their means) on credit.

    The more I read, the more apalled I am by it.


What do you think?