Credit Cards are wonderful financial tools if used appropriately. Without discipline they can be very expensive and stressful. If you know how to manage your money well, you can save tons of interest with a credit card. My friend bought his truck on a zero percent credit card and didn’t have to pay interest for at least for a full year. If I remember correctly, he paid the balance in full without ever incurring interest – of course he did have to pay a balance transfer fee, but at the time it had a cap. With the new credit card law, almost all credit card companies have removed the balance transfer fee cap.
The Good side of Credit Cards
Credit cards can also be a life saver if you find yourself in a tight pinch – maybe you lost your job or need to purchase something critical (like gas). Or perhaps you suddenly need to repair a leaky roof, if you didn’t have the cash and no credit, you’d incur further damages and costs. Many people will jump at zero percent credit card offers but they forget to read the fine print. Sometimes the zero percent card offers have really high regular APRs up to 20% or more. Now wouldn’t you prefer a zero percent card for 12 months with a regular purchase APR of 11% rather than a 12 month zero percent offer with a regular APR of 22%?
Sneaky 0% APR for Life on Balance Transfers
Beware of this offer; once again if you use it correctly you’ll be fine but if you don’t read the fine print you’ll end up paying through the nose. I received an offer in the mail from Discover Card that claims 0% APR for life. After reading the fine print I realized that in order to keep the 0% you have to make two purchases a month after the introductory period ends. Two purchases a month doesn’t sound to difficult but the 0% doesn’t apply to the purchases so you will be paying interest on any purchase that you make. You will not be able to pay off the purchase balance until you pay off the lower interest transfer balance. Here is an example:
You transfer $10,000 to your Discover card and make two purchases a month of $50 each to keep the 0% offer. The purchase APR is 20% and let us see how much interest you would be charged if you couldn’t pay off the entire $10,000 balance in 12 months so as to be able to pay off the purchase balance. By the end of the year you would have accumulated $138.29 in interest.
Rewards Cards
Check out our review of the Chase Sapphire Rewards Card.
