This thought intrigues me:  Is it possible for finance companies to actually make more money based on non-payments from their clients?

I wouldn’t have thought so, or at least until the other day. Here’s  a quick background of the situation:

Couple of months ago, my partner & I went shopping for a new fridge and washing machine. 

Intending to pay cash, and receive a discount for doing so, we were both bemused to learn that our ability to pay outright for these goods wasn’t necessarily what the department stores were looking for in a client.

Of course the department store would have preferred that we use hire purchase to acquire the goods.

Upon learning the department store had an interest free facility, we decided to take advantage of this offer for two reasons:

1. Why pay out a big wad of hard earned cash outright, and not save any money for doing so?  Far better to keep the wad of cash in the bank and get interest on it.

2. My partner, having never needed to hire purchase anything had no retail credit rating.

So my partner hire purchased the goods at zero interest and got on with life. 

At the time, I wondered how a department store could make money on time payments with no interest.

So a few days ago, I get a phone call from the finance company.

My partner Kirsten had neglected to pay the amount for the month, and it was now overdue for some three days. 

As Kirsten was overseas at the time, and I don’t like owing people money, I offered the finance company payment on behalf.

Because of the Privacy Act (according to the finance company) they could not disclose to me how much would need to be paid to settle the month. 

I then offered a payment which I was sure would more than cover the amount.

The finance company then refused to take this payment because I was not the person that owed it! 

After explaining our personal situation (and beginning to understand what was going on), I offered full immediate settlement of the debt.

I now had the paperwork in front of me, and offered $3,315 instead of the monthly payment of around $80.

Any guesses to the response?

I’m sorry sir, we are unable to take this payment from you!

Ludicrous!  Worse still, I was advised that if the amount remained unpaid, the account would have a penalty charge of $55!

This penalty amount is accrued every time the account is overdue!

Ok, so now I’m starting to learn how these guys can offer zero interest and make money.

Could it be said, that they would prefer the client to pay late, in order to charge exorbitant penalty fees?

The answer for us is simple, we’ll pay the debt in full this month and be done with it.

Of course not everyone has the ability to do this, and I  wonder how much money in penalty fees this company is making from people that can’t really afford it?