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.
How to improve your credit score: Tell your card issuer if you got a raise.
Dealing with record inflation: Americans have opened a record number of credit cards
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.
However, while jumping on a 0% financing offer may be a good decision for some people, for others it may 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.
Bad credit may not stop you from buying a home: But is it a good idea?
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.
Motley Fool Offer:Check out The Ascent’s best credit cards for 2022
We are firm believers in the Golden Rule, which is why editorial opinions are our own and have not been previously reviewed, approved or endorsed by the advertisers included. The Ascent does not cover all offers on the market. The editorial content of The Ascent is separate from the editorial content of The Motley Fool and is created by a different team of analysts. The Motley Fool has a disclosure policy.
The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.