topic Re: Should You Take Advantage of 0% Interest? in Credit Cards

Should You Take Advantage of 0% Interest?

Anonymous — Sat, 30 Nov 2019 18:59:41 GMT

Hey community!

Quick question, should you take advantage of 0% interest credit cards? I've always wondered about this and haven't found much info online. Here's the way I see it but am curious to see others opinions:

If you have the money to buy something and plan on keeping that money (i.e savings) and whatever you carry the balance with won't put you over the 30% util threshold, it's okay. You shouldn't buy anything you can't afford, and it's always a good idea to keep it open for emergencies.

Am I wrong? Would love to hear your thoughts!

Re: Should You Take Advantage of 0% Interest?

M_Smart007 — Sat, 30 Nov 2019 19:11:40 GMT

@Anonymous wrote:
Hey community!

Quick question, should you take advantage of 0% interest credit cards? I've always wondered about this and haven't found much info online. Here's the way I see it but am curious to see others opinions:

If you have the money to buy something and plan on keeping that money (i.e savings) and whatever you carry the balance with won't put you over the 30% util threshold, it's okay. You shouldn't buy anything you can't afford, and it's always a good idea to keep it open for emergencies.

Am I wrong? Would love to hear your thoughts!

In Red ^^^^^

IMHO .. but opinions will vary ..

Re: Should You Take Advantage of 0% Interest?

kilroy8 — Sat, 30 Nov 2019 19:16:51 GMT

Free money is good and hard to pass up.

Key is to make sure you pay it down steadily (much more than minimum), every month, and make sure it is zero before the rate expires.

Re: Should You Take Advantage of 0% Interest?

TSlop — Sat, 30 Nov 2019 19:17:49 GMT

I take advantage of 0% whenever I need big purchases and don't want to shell out savings and/or cash. This year both my refrigerator and dishwasher broke, so I did 18 and 12 month 0% financing, respectively, through my Best Buy credit card. I just finished off 2 years of 0% on a bedroom set. I also just did 0% through Google on my Pixel 3 instead of paying cash; I just didn't feel like dropping $500 and took 0% over points on a credit card.

I think 0% is definitely worth it as long as the payments won't bankrupt you. I'm also financially responsible so there is that to factor in. Like you said, don't buy what you can't afford.

Re: Should You Take Advantage of 0% Interest?

Anonymous — Sat, 30 Nov 2019 20:44:09 GMT

In theory, it makes sense when you have something much better to do with your cash (and you are certain to be able to pay off when the 0% period ends). If it was still easy to get 5% interest on simple savings accounts, then yes. With rates so low now, the gains are more minimal, and you have to decide if the effort is worth the return!

Re: Should You Take Advantage of 0% Interest?

Anonymous — Sat, 30 Nov 2019 21:11:20 GMT

I personally don't like carrying balances. My BK taught me a harsh lesson on how quickly things can get out of control so I try not to carry a balance more than a few months, even if I have 0% for 12-15. It's not really worth the stress for me to use my float despite the fact I have a fixed income being on SSDI and always know that I'll have that money coming in - there's still the fear that something could go wrong, like a government shutdown or something, and that always pushes me to pay them off much quicker than I have to.

Re: Should You Take Advantage of 0% Interest?

AceTen — Sat, 30 Nov 2019 21:33:40 GMT

Hello! I am new here so my opinions should be taken with a grain of salt but I do make practical use of 0% cards. I like getting a new 0% card with a nice sign up bonus each year to make my big regular purchases or business and pay it off when I want. My income can vary quite a bit from month to month because I am self employed so it's nice to have 0% if I need it for a month or two.

Of course the last few months I found myfico and thusly started sweating my credit scores so I've been paying off my 0% balance to test the point gain on the various utilization thresholds. I've got better things to do that worry about a few credit score points but now I'm obsssed apprently so I'm not sure I can allow myself to carry those 1-3k 0% balances because of the drop in score. Silly me.

Some people may also elect to use a 0% balance card while using that cash to open a bank account with a sign up bonus. One could make maybe $200-$500 by holding a few thousand in a bank account to earn a bank sub and then use that cash to pay off their 0% card at the end of the 6 months or whatever time requirement for the bank bonus and pocket the $200-$500 cash. Maybe that's leveraging for the little gals and guys.

Re: Should You Take Advantage of 0% Interest?

Anonymous — Sat, 30 Nov 2019 22:22:58 GMT

I got my first - interest card last March, an Amex Everyday Rewards. I moved most spending from my platinum except purchases that coudl get double or more points.

Each month I'd take my total balance and divide by the number of interst-free months left and pay that.

So yes, I'm a big fan of interest free - but to be clear, my utiilization is usually under 10% and has never seen 20%. LIke points, cashback, Rakuten, etc., it's a way to save some money on things you're buying anyway. If you don't need or want it, don't buy it at any price.

Re: Should You Take Advantage of 0% Interest?

wasCB14 — Sun, 01 Dec 2019 00:42:34 GMT

If 0% or a no-fee Plan It promo make something my card of choice (weighing no interest against better rewards or other benefits elsewhere), I will be pretty aggressive in using it and ignore single-card utilization.

Re: Should You Take Advantage of 0% Interest?

Anonymous — Sun, 01 Dec 2019 01:19:13 GMT

I use them all the time, especially with new cards. If you have excellent credit, have all cards paid off, and have a high degree of discipline, it can work out well.

I'll take a new card, make my USUAL purchases on it, and max it out. The amount of spend minus the minimum payment goes into a high interest money market account. When the 0 ends, you PIF so that no interest is paid.

You must ALWAYS have the entire balance of the card in the money market account. At any given point in time you need to be able to pay the entire balance in full, just to keep the process in check so that if you have to PIF, you can.

If you can do that, and you are confident that maxing out a card won't cause issues with your other card issuers, then do it. If you are not comfortable with 99% utilization, then don't do it. Go up to a utilization you are comfortable with. 50%, 30%, etc. The amount of interest you can make is dependent on how high utilization you are comfortable with, the interest rate of your money market account, how high your limit is, and the length of the 0% offer.

The ideal is 15-18 months and total spend above 15K.

Re: Should You Take Advantage of 0% Interest?

frugal47374 — Sun, 01 Dec 2019 03:38:52 GMT

I make maximum use of any 0% deals as long as the value of the 0% money exceeds the bonuses I get with normal credit card spending. (This is, of course, only if the 0% comes with no fees. I have never paid for credit.)

And I pay back the minimum every month.

My credit scores aren't helped by this, but I don't need access to other credit so that doesn't concern me.

Of course, I am sure to always have the assets necessary to pay off all the credit card debt immediately.

Re: Should You Take Advantage of 0% Interest?

Aim_High — Mon, 02 Dec 2019 01:05:24 GMT

I think it can be a helpful financial management tool and card benefit ... with the caveats that you need to really know what you're doing and don't get in over your head. You need to understand the ramifications and risks of what you're doing. If you elect to run up a large portion of your limit (such as suggestions about saving equivalent amounts in high-yield savings), there is still a short-term impact to your credit score. If you don't care about that impact for the short term, no problem. If you do, maybe you should pay it off sooner rather than later. I also appreciate the advice about how easily you can get in over your head by running up balances, so be very careful. I have plans to run up my balance on a transfer offer on a new card, but I don't need to do it. I plan to pay it off very quickly to prove to the lender I can handle it and perhaps qualify more quickly for CLIs. I think I've read about others using BT offers similarly as well.

Re: Should You Take Advantage of 0% Interest?

Revelate — Sun, 01 Dec 2019 20:41:39 GMT

I'd absolutely leverage them if I had them, but I generally don't have a lot of debt laying around other than the auto and mortgage notes.

But simple math: if I had 20K CL at 0% and instead paid that towards my car note that's still 20K x 3.85% or $770 free and clear no taxes guarunteed return.

This year's an outlier to be sure but if I'd just dumped it in the S&P 500, well... 25.3% at the close Friday, or $5060 free money, minus taxes potentially.

I may use one the next time I look to be unemployed if I don't just walk at that point: I was floating expenses at 5% and that wasn't a terrible option for me, and 0% would be even better. Might try to finance 2-3 semesters of school on a 0% card though I'm starting to think twice about going down that road... there's a lot of options if it's something you were going to spend the money on anyway, and it's almost always better to have cash in hand in my opinion.

Re: Should You Take Advantage of 0% Interest?

Anonymous — Mon, 02 Dec 2019 04:35:32 GMT

Yes it makes sense to take advantage of 0% interest on purchases as long as your smart about it. Last year I did a lot of renovations on my house and used the 0% interest rates on my Amex ED and Discover IT cards. Two weeks ago I just used the 0% interest rate on my Chase Freedom to pay to have a tree removed from my front lawn and several tree stumps on my property ground up. I used the 0% interest rates on credit cards so it wouldn't interrupt my normal cashflow paying for these large expenses. Using the 0% interest on purchases I was able to continue to put money into my savings and brokerage account while paying down my large expenses over time.

However I do want to note that I have cash reserves large enough to easily cover those expenses. I never leaned on a 0% interest on a credit card as my "emergency fund" nor do I ever plan to. I personally view that as great way to get financially burned very badly. I use 0% interest rates on credit cards for large expenses that I can pay over time so I don't disrupt my investing stragety and/or force me to have withdraw money from my savings. So while yes this is a great strategy to use 0% interest on credit cards for large expenses it's only a great strategy if you do it wisely. If you don't do it wisely you can and most likely will burn yourself badly.