What are the pros and cons of buying an item on installments with zero percent interest?
If (and only if) there is a zero interest installment plan available, technically the only uncontrollable risk is that there will likely be a hard inquiry on your credit report which may or may not also have a corresponding debt obligation attached to it. (Personally, I recently signed up for one such plan with Google and I had a hard inquiry but no debt added to my report). The other risks are that 1) your monthly payment goes up, so if you are living on a tight budget the added payment might make it harder to meet your next bill, and 2) you could miss a payment which generally triggers interest to accrue retroactively at a high rate, and in some cases could be grounds for immediate repayment. The pro / reward of these plans is that you have to spend less of your capital upfront, which you may be able to use for other purposes (presumably with a higher net present value than purchasing the item you're considering outright). A larger example would be purchasing a new car. You want to buy a $50k car and you have the cash on hand to pay in full, but you are being offered 0% interest for 36 months. You may be more inclined to take a loan at 0% with 0 down payment and invest your money in another vehicle (no pun intended) that offers you a decent rate of return and you will come out ahead in the end. Of course, this example works in a perfect world where you can get such an offer, there are no extra fees available, you aren't worrying about your debt-to-income ratio in preparation for a big purchase like a house, there isn't a higher insurance premium to consider, etc. In short, 0% financing, be it for a phone or a car, can be a nice perk for the informed consumer who is not using the financing as a way to purchase outside their financial means, but it is offered by companies as a way to make people buy things they normally would not and, hopefully, capitalize on people missing payments in order to reap the sweet 20%+ interest rates generally seen with these offers.  In your specific situation with the phone, you should consider if you get a discount on your monthly plan for purchasing outright, or if you can get the phone subsidized if you sign a contract (and you know you like your provider enough to stay for its duration). If the monthly plan rate stays the same and you're looking at either $500 now or $500 over 24 months and you don't mind a hard inquiry, there's not much of compelling reason to pass on the financing and hold on to your $500. "One small advantage to paying ahead is having an outstanding installment plan may preclude unlocking the phone for use on other carriers, for example during international travel. If unlocking is important, researching the particulars would be in order. I am more familiar with T-Mobile, and will use as a specific example. If I pay upfront, I can purchase the phone from Apple totally unlocked, and T-Mobile has no say in whether I use it on another carrier or not. (This actually costs a little more, because the phone from Apple doesn't come with a SIM, and T-Mobile charges for the SIM. At least as of iPhone 5s.) Looking at ""Unlock your mobile wireless device, Unlock Requirements"" on T-Mobile's website, at least some payment plans do not allow unlock until the phone is paid off. Obviously phones purchased for full price from T-Mobile start out paid off." "I personally take the zero percent financing plans any day.  I have done this with my car and the iphone 6s.  The vendors are trying to make it more attractive for you to ""afford"" the product.  It could show up on your credit report and impact the amount of money you can borrow in the future (e.g getting a home loan).  The other thing I do is make sure the monthly payments are automatically paid from my bank account so I don't miss any payments"
The bank depends on the laws of large numbers.  They don't need to make money on every customer -- just on average. There are several ways that zero interest makes sense to them: You asked about banks, and I don't think you see this last scheme in use very much by a bank.  Here's why.   First, customers absolutely hate it - and when you drop the interest bomb, they will warn their friends away, blow you up on social media, call the TV news consumer protectors, and never, ever, ever do business with you again.  Which defeats your efforts in customer acquisition.  Second, it only works on that narrow range of people who default just a little bit, i.e. who have an auto-pay malfunction.  If someone really defaults, not only will they not pay the punishment interest, they won't pay the principal either!  This only makes sense for secured loans like furniture or cars, where you can repo that stuff - with unsecured loans, you don't really have any power to force them to pay, short of burning their credit.  You can sue them, but you can't get blood from a stone. "And I'm reading through the pack of stuff  There should be a soft copy of Terms and Conditions. If so, please put up a link. Generally 0% APR comes with some strings attached. The literature on the Bank of America site shows 0% APR only for Balance Transfers done with 60 days.  On one of the comparison sites; the Bank of America card shows 0% only for balance transfers and purchases done in first 60 days. 0% Introductory APR for 12 billing cycles for purchases AND for any balance transfers made in the first 60 days, then, 13.24% - 23.24% Variable APR. 3% fee (min $10) applies to balance transfers. Which means that if you spend say $200 in first 2 months, you can repay this $200 in next 12 months at 0% APR. However if you spend another $100 in 3 month, this should be paid in full along with a portion of $200; else interest would start for all of $300. Generally 0% APR don't make sense as there are lots of hidden terms and conditions and the real benefit may not be that great.  Edits: The Literature looks quite confusing. On the Main Page it says; Introductory APR   0% for 12 billing cycles   Applies to purchases and to any balance transfers made within 60 days of opening your account This would mean say you do a Balance transfer within 60 days, of 120 and say you make purchases with 60 days of 120. Total liability is 240.  Scenario 1: Assume you do not use this card. Then you can safely keep making payments of 20 per month for next one year. Scenario 2: In 3rd month, you swipe for 100 more. Now the Total Due will be 100+20. If you make the payment of 120, then fine. If you make a payment of only say 50; Then the interest will be calculated for [240-40, payments for 2 months+50 of current month]; i.e. on 250. However the detailed ""Terms of Conditions"" seem to limit this only to Balance Transfer of 120 in first 60 days and not to any purchases in first 60 days. With Terms so vague, my suggestion, don't get this card for these benefits. Get this if you need a regular card." First, I assume you understand that 'Cash Offer' doesn't mean you really show up with cash (in a duffel bag...), but is an expression that designates that you don't need a mortgage approval, but have the money in your accounts. The advantages for the seller are With both cases depending on the seller's situation, there can't be a generic answer, and the 'discount' will be all over the place between zero and several percent. Read the terms and conditions very carefully. Many zero percent deals have a requirement that you pay back at a certain date, and if you don't, you'll have to pay some enormous percentage. Nobody will remind you of the date, because the lender has the secret hope that you will forget. I struggle with 0% interest things in my personal life.  A responsible me that thinks logically says continue to pay it on time and take advantage of the benefit of the interest free loan you got. It will keep your funds liquid in the case of an emergency, build your credit and teach you self control.  Paying it off now has little to no benefit. It does however tie up $3,000 worth of capital you could be using for building interest or leveraging against other purchases. I mean, at a personal level, I do this all the time. I will absolutely take advantage of low interest financing offers if I know I can make more money with the outstanding balance than will be drawn in interest.  It can also make sense from a risk management perspective: I need liquidity even if I can cover the cost, I anticipate needing a large sum of cash over a short interval during the finance period. If I were to pay all upfront the cumulative expenditures would Darwin me too close to my safety threshold for my comfort level, but by financing I can distribute the risk and keep a higher margin for error over the course of the loan. As no one has mentioned them I will...  The US  Treasury issues at least two forms of bonds that tend to always pay some interest even when prevailing rates are zero or negative.  The two that I know of are TIPS and I series bonds. Below are links to the descriptions of these bonds: http://www.treasurydirect.gov/indiv/research/indepth/tips/res_tips.htm http://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm "I'd put more money down and avoid financing. I personally don't think car debt is good debt and if you can't afford the car, you are better off with a cheaper car. Also, you should read up on the 0% offer before deciding to commit.   Here's one article that is slightly dated, but discusses some pros and cons of 0% financing. My main point though is that 0% financing is not ""free"" and you need to consider the cost of that financing before making the purchase.  Aside from the normal loan costs of having a monthly payment, possibly buying too much car by looking at monthly cost, etc., a 0% financing offer usually forces you to give the dealer/financing company any rebates that are due to you, in essence making the car cost more." "Pay cash.  You have the cash to pay for it now, but God forbid something happen to you or your wife that requires you to dip into that cash in the future. In such an event, you could end up paying a lot more for your home theater than you planned. The best way to keep your consumer credit card debt at zero (and protect your already-excellent credit) is to not add to the number of credit cards you already have.   At least in the U.S., interest rates on saving accounts of any sort are so low, I don't think it's worthwhile to include as a deciding factor in whether not you ""borrow"" at 0% instead of buying in cash." Read the fine print and you will be fine.  The big caveat is that if you miss a payment for any reason, you will be in default as far as the promotional financing is concerned and will typically owe ALL of the accrued interest, which is usually computed at 20-25% per year. Personally, I use these sorts of offers all of the time at places like Home Depot for stuff that doesn't generally need warranty service. (Wood, tools, etc) Usually I pay the thing off over time as CDs mature. If I'm buying a TV, computer, etc. I always use my AMEX, because I get an extra year of warranty service and points for free. Assets with zero value, perhaps. Unless you can prove that they have resale value. Good luck with that. In other words, not worth spending time on. I have done this for years and have been quite successful at it. Two reason I even need to do this - desire to pay for engagement ring and pay for 150 person wedding without using my nest-egg/savings.  You need to keep a document that details when the free APRs run out, and you need to setup automatic payments of the minimum balance from your checking account so you ensure you do not miss a payment.  You need to understand when you are going to need to make big purchases of homes/apartments/cars so that you can ensure you aren't doing this right before your credit score is being checked (Need to leave 12 months without opening new accounts before doing this).  I have been able to finance about $60,000 worth of unsecured debt paying between 3-5% interest per year. We have an unsecured credit line with Citibank that charges 14% and is capped at $10,000, and Discover Personal Loans charge around 14% as well (in pre-paid interest!).  I would say, all things considering, that this is a great deal if you don't have a secured line of credit with a low interest rate.  It is something, however, that if you aren't diligent can get away from you. From my experience I would rather pay a small amount of interest while allowing my savings and retirement to grow interest (hopefully greater than 3-5%) than pay the huge expense and start from zero. But if you miss a single payment on a 0 APR balance transfer they charge you all back interest concessions plus charge you a penalty rate.  Like many of the other posts, you need discipline to make this work. "As others have said: unless you can find someone willing to make a zero-interest loan, the answer is no.  If you can figure out how to turn a ""0% for first N months"" credit card offer onto a leveraged investment or something of that sort -- seems unlikely -- maybe." "No. That's pretty unlikely. Card issuers typically base your rate on your credit score. Paying down debt reduces your percent of available credit used, and improves your score until you are in the 1-20% range. That's optimum. To this issuer, you are one of a million customers, there's no emotion in this, just numbers to them. For what it's worth, if a card issuer raises your rate, you are permitted to ""not accept"" the rate, stop using the card for new charges, and pay at the current rate. Of course this doesn't apply to zero interest deals, only to increases to your regular rate." It's a con being played upon the middle money people by the big money people and it's based on the Bernoulli Principle or Venturi Effect. Simply put -- and in analogous form -- if a lot of something goes in one direction, then a lot of other similar somethings will go in the same direction too. So, if a lot of big money gets invested into derivatives then other money will follow. That original big money is called the primer -- it primes the pump flow and gets the other money following it in. If the original money, the primer, gets removed from the process it doesn't stop the flow of other money into the flow because once the flow is going, any new money in the process acts like the original primer money, sucking in even more money; this is the Venturi Effect in action -- it's how most pumps work.  So, you prime the pump, get it flowing nicely, move your priming money out of the process and wait for the thing to suck out as much money as the economy can withstand and then *crash,* er, profit! If you've set your stakes correctly to benefit from the stopping of the flow -- the crash -- you can make billions with very little effort and practically no risk at all.