Store Credit or Credit Card?

Question

You just found out you are expecting a child. You went to Wal Mart and bought everything you think you may need to prepare for the arrival of your child. You spent $2000! You need to decide if you should put it on your credit card or use the store credit provided by Wal Mart. (For tax purposes, you live in Nova Scotia and the HST is back up to 15%). Wal Mart's deal is that you can pay the taxes on the purchase and a fee of $50 immediately, then not pay for one year. At the end of that year you must make 48 monthly payments of $60. If you put it on your credit card (remember to include the tax!) your credit card company charges you a monthly interest charge of 1% and you must make a monthly payment of 30% Which plan will you go with and why? (Show calculations for both options).

Answer 1

Neither. I would never rush out and spend $2,000 that I did not have for baby items when I just found out I was expecting. You have 9 months to buy things as you have the cash, not to mention gifts from friends and family.

But even more, there is no way that you would need $2,000 worth of baby things for a newborn. You don't need a lot of the normal baby furniture, like a high chair, for several months.

I know your question was meant to be some kind of mathematical decision as to which options was the best financially, but the whole concept of rushing out and spending a large sum of money that you don't have for things you don't need right now, is exactly how people get themselves into financial trouble.