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Why you need to be more careful than ever with a 0% financing offer

By on July 13, 2022 0

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Don’t set yourself up for failure.


Key points

  • A 0% credit card may seem like a good deal.
  • In reality, you could find yourself stuck paying a lot of interest, especially with rising rates like today.

Recently, a friend of mine bought a house and learned the hard way that owning a house means taking on a world of unexpected expenses. Through a series of immediate home repairs, she found herself in a situation where she had to finance the purchase of a piece of furniture or potentially spend her first few months in her new home without a kitchen table. (she does Is have money in savings that she can tap into, but she wants to set aside that money for emergencies.)

Right before buying her house, my friend decided to apply for a credit card with a 0% introductory financing offer. She then used her new card to cover the cost of her furniture. Since she gets an 18-month reprieve from interest payments and saves money on every paycheck she receives, there’s a good chance her balance will be paid off in full at the end of the day. end of its introductory period.

But not everyone is able to repay their debts so quickly. And that’s why you have to be careful with 0% credit card introductory offers – especially these days with rising interest rates.

Don’t get stuck paying more

Calling the 0% introductory rate is simple, because it’s essentially a free pass to pay no interest for a certain period of time. You may decide to take advantage of one of these offers if money is tight right now but you expect a short-term windfall (like a work bonus or a tax refund). Or, you can decide to use a 0% introductory rate credit card for purchases you can pay for with your savings so you can leave your money alone and let it earn interest.

But while jumping on a 0% finance offer might be a good move for some people, for others it can be a dangerous thing – namely, because you could easily end up with high interest charges. if you do not pay your balance before the end of your introductory period. In fact, you may find that the interest rate you face on a card with a 0% introductory offer is higher than the interest rate on your other credit cards.

Additionally, credit card interest rates are currently on the rise due to interest rate hikes by the Federal Reserve. And so, if you charge spend on a 0% introductory rate card and don’t pay your balance in full when the introductory period expires, you could really end up losing a lot of money. in interest over time.

Don’t get in over your head

A 0% introductory offer may seem tempting. But resist the urge to finance a 0% interest purchase unless it’s absolutely necessary.

In my friend’s case, she charged her expenses to a credit card because she wanted to maintain better cash flow and because she knows she usually saves enough money each month to pay off her balance before the end of its 0% APR period. But if you can’t say the same, it’s better to avoid these offers, as tempting as they are.

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