0% Credit Card Debt

[cooliemae]

As of late, I've continually heard from the media that paying down credit card debt is the best investment right now, due to savings you would see in interest payments.

But that brought a question to mind, and I was wondering what others thought about 0% credit card debt.

I'm getting married in a little over two weeks and my soon-to-be wife and I are using two 0% offers from our credit card companies to pay for a good deal of the wedding. We actually have the cash to pay for everything out of hand, but that would leave us with a very small EF. With the credit crunch we both feel that it would be better to have more liquidity in this time of uncertainty.

So we'll keep the money in the bank and draw the 3% interest rate on the money for the next year and slowly pay down the credit card debt until the last payment when we'll pay it off in full, having not paid any interest on the debt and having reaped the rewards benefits.

The only other debt that we have right now is her student loan (5.75%). We own our cars, and are not looking at purchasing a house until probably 2010. As for the hit on our credit scores, if we need to purchase something large we have the ability to pay off the debt before having our scores pulled.

Now I know some out there would say take the money for the wedding, throw it towards the student loan and elope, but we both want a nice wedding for a variety of reasons.

So, does anyone else take advantage of 0% rates when purchasing larger items in order to make a little dough while in the promotional period? Or are all credit cards evil and to be avoided at all cost?

[rooskers]

I used an awards credit card (3% cash back) that had a one year 0% introductory rate. It was great we got money back from the credit card and earned interest on the money we had saved for the wedding.

** Be very careful because many credit card contracts come with something called a universal default clause. Without going into too much detail this clause gives them the right to basically raise your interest rate at anytime. Example of some things that might trigger the default clause is if your late on any payment, late on a loan payment from another company, exceeding your credit limit, having too much debt, having too much credit, getting a new credit card, etc...

So while it can be a great deal I strongly encourage anyone who does something like this to make sure they have the means to pay off the credit card at a moments notice.

[MonkeyMama]

I have used 0% debt for leverage (when I had the cash in the bank) many times.

I've done as you describe, and I have also borrowed money and let it sit in the bank and earn interest.

BTW, something else that can trigger universal default is ID Theft. I had $15k in 0% balance transfers sitting in cash when my identity was stolen and several cards were opened in my name. Scared me that I would face UD on my balance transfers (though I had the cash ready to pay back if that happened). Credit card companies are largely moving away from this. It ended up not being an issue for me, probably most likely because I caught the theft immediately. BUT one of my cards informed me they no longer do universal default, around the same time.

But yeah, you have to read all the fine print, and really know how to play the game. If you can, you will be fine. If not, I wouldn't bother.

[MiikeB]

Also a good idea is to pay it off one or two months ahead, in case something happens like lost in mail etc. The interest you will lose is not worth the possible headache, especially considering a lot of cards defer the interest then wipe it if you pay the balance in full by the date, so if you are late you have to pay back all the interest that was deferred since you got the card.

[JinCO]

We have used 0% CC's in the past as well. I have never had any issues with creditors trying to raise rates. As long as you have money in the bank to pay off the balance I don't see it as an issue.

[MonkeyMama]

Good point. I paid all my BTs off a full month early, just to be on the safe side. But I paid online so I could see the payment hit and so I could monitor it if for any reason it did not post right away.

That is something I would not leave to the mail (our mail is horrible anyway - things often lost for weeks).

[boosami]

I've done this many times with 0% interest offers, usually on existing lines of credit. Only had problems one time years ago when the creditor was unjustly holding up processing to charge fees. That has since changed, and I was reimbursed for the interest/fees.

Like everyone mentioned, make sure you pay well ahead of the due date each month. A single late payment will blow your promotional APR.