0% Interest — too good to be true???

Over the past 15 years, I have received numerous offers to sign up for this credit card or that credit card.  Interest rates offered have varied from 0% to 5.99%, some offer FREE miles or cash-back awards and most come with transfer balance offers.  Some are 0% for transfer balances only.  Some are 0% for all purchases. 

Perhaps you receive just as many of these every week and have been tempted to take advantage of them.  Let me just say that I feel like the 0% Interest Queen.  Since 1991 I have borrowed about $100,000 from various credit cards and paid 0% interest.  In most instances, I was able to transfer balances from one card to the other with no fee but at times, there would be a $35 – $50 charge for the transfer.

Here are a few pointers to be aware of:

• some card companies now charge a minimum of $10 or 3% of the transfer balance
• some require a purchase every month until the transfer balance is paid off
• you will have to pay a minimum of 2% of your balance every month.

Using a 0% credit card has made it possible for me to purchase many things that I would not have been able to buy otherwise.  I don’t abuse my credit cards but I love having the freedom to buy something I really want knowing that I won’t incur any interest.  I always pay well over the required monthly payment so that I can clear the balance that much sooner.  Because of this my credit rating is Excellent which means I get more 0%offers. 

The only problem I have experienced is keeping track of when the 0% offer expires.  To solve this problem, I created a folder with information on each card showing the 16 digit account number, the date I transferred the balance, the date the payment is due and the date this offer expires.  Since I make all payments online, I indicate when I have scheduled the payment.  Most cards allow you to schedule your payments ahead of time so I normally schedule all the payments for the upcoming month.   At the moment I have four cards with 0% interest that I am paying on.  Hopefully, I will be able to consolidate these four down to 2 or 3 once the balances are low enough. 

My last big transfer was a student loan of $25,000 to a 0% card.  I had paid on this loan for over 4 years — every month, the interest was over $180.  I received an offer with a credit limit of $26,000 so I did the math and realized that I would be required to pay 2% of the balance if I decided to transfer this loan.  In the past 6 months, I have paid off $3,000 of this balance but it’s all principal.  By the time the 0% expires, hopefully, there will be another 0% offer to transfer this balance.

Maybe this would work for you … maybe not.  It does require record keeping but for me, it’s worth it!

Louise

Credit Cards … “to have” or “not to have”?:

I remember my very first credit card.  It was 1968.  I was working on Wall Street and made $85 a week.  The credit card application came in the mail and made me feel important.  Wow!  I could have my own credit card.  My mother NEVER bought anything she couldn’t pay for with cash so I didn’t dare tell her that I planned to apply for this credit card. 

The card arrived and I tucked it in my wallet.  It’s funny … I can’t remember what my first purchase was.  I just know that before long I had a $400 balance.  It frightened me to think that I had almost reached the limit on this card (it was only $500) in such a short time.  I panicked because I felt trapped.  I owed $400 for things that were already “old”.  Now I had no money to buy “new” things.  Right then and there, I made the decision to cut up this card and never again let myself get into such a situation.  But let’s fast forward to today ….

I have at least 4 credit cards in my wallet.  One I use all the time.  I even pay for my groceries with this card.  “How awful!” you might say.  I know.  I use to feel that way, too, when I saw someone pull out their card to pay for the food they would soon eat and then make payments on for the next year, with interest.  But you see, I have learned to “discipline” myself.  Two of these cards are debit cards, the other one is just in my wallet in case the vendor doesn’t accept Discover.  In 2006, Discover Card paid me over $700 to use their card.  Now I think that’s pretty good when you consider that I didn’t pay a penny in interest.  Like I said, I use it for everything.  But the secret is that I pay my bill in full each month.  Some months have been scary because the balance was higher than normal, but that’s because we bought big ticket items.  The money was in the bank to pay the bill but it’s still scary because you’re always tempted to use the money for something else.  Again, I have to be disciplined to pay the bill in full.

It’s not the credit card that is bad.  It’s how I use the credit card that makes it a bad thing to have in my possession.  If I am feeling down and decide to go shopping, I can get myself in a heap of trouble.  I love to shop in stores like Hobby Lobby or Tuesday Morning where there are so many neat items, things you just don’t see everyday.  And I love bargains — these stores have signs all over the place that read “50% off”.  What a bargain!  How can I resist?  There have been times (too many, in fact) when I have just gone crazy.  Now crazy for me and crazy for you may be very different.  If I spend $50 on something frivoulous, that’s “crazy for me”.  I truly am a very frugile person. 

What I am trying to say is that I know my weakness.  I know not to shop at these stores on a regular basis because I usually buy something I can live without.  I also know my budget and I try to stay within it.

My credit cards have actually been a blessing over the years:

Paying with my debit cards, instead of writing checks, has saved me the cost of ordering new checks.  That can be a huge savings because I use duplicate checks!   

Many times I have been able to purchase something that I truly needed and didn’t have the cash to buy … like new tires for the car or a new refrigerator when the old one died.

The other night I was looking through old credit card statements for a particular “balance transfer”.  I realized that since 1991, I have actually borrowed over $100,000 from various credit card companies and never paid a penny in interest.  Now, in some cases, I did have to pay a balance transfer fee of $35 or $50 but not very often.  In fact, now the balance transfer fee has no cap … in most cases it’s just 3% of the amount transferred.  That could be a little pricy.  But seriously, I have been able to borrow all this money because my credit is so good.  HOWEVER, you must realize that I don’t spend foolishly.  Every penny I have borrowed has been for things I really needed; i.e. deck materials, remodeling items, new washer/dryer, storage shed, college tuition … and the list goes on.   

Don’t get me wrong.  Transferring balances can be a job in itself.  Each credit card has its own criteria.  On one I had to make 2 purchases every month and pay on time.  On another, I just had to make one purchase and pay on time.  The secret here is making sure there’s no certain $ amount that has to be purchased … I usually bought 5 $.39 stamps.  That was one purchase.  You also have to keep the “purchases” low because when you make the payment, it is applied to the balance that has the 0% interest rate.  The “purchases” are usually charged 9% – 19% interest so you can’t have that balance adding up real quick.  You will be defeating your purpose.

 I guess in my case, credit cards are good.  Are they good for you?  Do you have some other creative ways to use your cards that you would like to share? 

Maybe you’ve never given any thought to the amount of interest you are paying.  That’s a topic for next time.  I hope you will visit and feel free to give me your comments.

Until next time, these thoughts are from The Desk of Louise.