Let me first describe a situation for you. Then, let’s consider if it’s fair.  And, then, I’ll tell you who it is about.

Imagine you can buy a product- a pricey one- without a credit card.  And, get 12 months to pay.  Okay, there’s also a  $79 origination fee.  The repayment plan matches the frequency of your paycheck.  If you elect to pay off the balance in 90 days or less, you are only out the $ 79 origination fee.  If you elect to pay off the balance in a year, you probably will repay the cost of the loan plus 100%.

Obviously, if you pay off the loan in 90 days, it’s a pretty good deal.  Because if you did that with your credit card (don’t forget most of these folks won’t have the best credit), you’d end up paying around 6% more than the actual cost.  Which means if you bought something for $ 1667, you’d break even,when compared to what you’d pay using a credit card.  (The $ 79 fee is equivalent to the 90 day interest amount for this product price.  For cheaper things, the origination fees are costlier.  For more expensive items, the fee is a bargain.)

So, do you think this is fair?  I mean paying twice the amount of the object, just to get it now doesn’t sound so cool.  But, if your child needs a computer and your credit card is maxed out and this store won’t grant you a new credit card, what’s a parent to do?

But, maybe we need to consider something else about this deal.  It’s not clear this store would offer that plan to me.  Because I can probably get the store credit card- or use one of my many credit cards to buy the item.

Moreover, it’s not totally clear that the store makes it clear to the customer right from the start that if they pay off the loan in 90 days or less, there is no interest charge- just the origination fee.

I use this sort of financing often- with a 6 month period to pay it off without interest.  But, the process I use doesn’t have an origination fee.  So, I just get to extend myself some credit- for a new computer, a great vacation, or a fancy fridge.  (Those are exactly for what I’ve used that credit vehicle.)

Who is the vendor I just described?  Best Buy.  In conjunction with Progressive Leasing.  They call this plan a lease-to-own program, and it is offered to those customers who are refused Best Buy credit.

Many of Best Buy’s employees think this is a form of gouging the customer.  Who pay twice as much for that new smartphone or computer. (And, the multiple seems to be 2.09, not just twice the cost.)

By the way, Progressive Leasing has deals with other vendors- Lowe’s, Big Lots, Kay Jewelers, among them.  The same deal as with Best Buy.  These vendors like the program because they get paid up front and Progressive assumes the risk on collecting the debt.

I’m looking forward to hearing your views on this program.