A zero-interest credit card may sound too good to be true. Many might even be tempted to see the offer as “free money.” After all, aren’t high rates the biggest reason to avoid credit cards? Taking a no interest credit card offer is a no-brainer, right?
The answer is, not necessarily. This decision depends on your history, financial situation, and current spending habits—not to mention the surprises that may arise if you jump into a zero-interest loan without reading and understanding every line of the fine print.
It’s in the Cards
Before deciding whether you should get a no interest credit card, look at these common types of zero interest agreements:
Show Me the Money
So should you go for it? When deciding whether or not to enter a credit card agreement, no matter the rate, there are a few things you should ask yourself first:
Now that we’ve looked at what a no interest loan might really look like, let’s to discuss different financial scenarios that you may be in right now – and whether any of them would benefit from an interest-free line of credit.
You need to make a purchase, but don’t have the funds available. If it’s a true “need”, then your emergency fund should cover the amount. If it doesn’t, then you should be working to build that up instead of buying things on credit. If this is you, call a non-profit credit counselor to discuss why a new line of credit – no matter the APR – is not the most beneficial route for you.
You’re a financial guru with a well-stocked reserve fund for emergencies, and you only use credit cards for their rewards, points, or to build your credit score. You pay your entire balance each month and pride yourself on being “ready for anything.” You have the amount of the purchase safely sitting in a savings account, ready to auto-debit monthly so you never miss a payment. If this is you, then instead of increasing your debt equity ratio without much return, why not invest it where it will grow?
Sometimes, when a great offer comes up, it’s hard to decline. That’s why in the case of interest-free lines of credit, it might take more effort to walk away. In that case, we say, “run.” If you don’t feel you can trust yourself to use credit wisely, then the best move is to put the pen down, take a deep breath, and remember your goals and source of inspiration. Need help staying on track or tackeling debt? Let CESI help!
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Consumer Education Services, Inc. (CESI) is a non-profit service provider of comprehensive personal financial education and solutions for all life stages and for all of life’s milestones. Our goal is enhanced economic security for everyone we serve.
CESI is NOT A LOAN COMPANY