Any drawback to 0% APR Purchases?

[matthew321]

I have a Chase credit card that has a 0% APR purchase promo for six months.

Are there any drawbacks or negative effects in using it?

In other words if I only pay the minimum instead of the full amount for the remaining period since it's no interest, is it probable that my interest rate would increase at the end of the promo period for taking advantage of this?

Also I'm wondering now that the credit reform act is implemented, would the 0% APR remain on purchases even after the six months?

Thanks.

[JoshuaHeckathorn]

First, the CARD Act will not do anything to change the length of your 0% APR promo period. The new rules do require that teaser rates last for at least 6 months, but your card meets that requirement anyway. When the 6 months are up, your rate will jump up to whatever it says in the terms of your agreement. It will not remain at 0%.

Now, I really wouldn't recommend buying anything on your card that you can't afford to pay in full at the end of the month when your statement closes. That's how credit cards should always be used. Enjoy the convenience, purchase protection, rewards, grace period, etc., while always paying in full and on time. 0% promos are meant to entice people to spend more than they should with the intent to pay it off over time. So, unless you know for certain you're responsible enough to use the promo period and make sure everything is paid off well in advance of the 6-month mark, it's not worth taking the risk.

[matthew321]

So if my normal APR said 12.99%, and I pay whatever I want even only the minimum during the 0% APR period, it will have no effect on my interest rate later, did I understand correctly?

If it's interest free, why pay them in full instead of keeping it in the bank and paying them right before interest kicks in?

[disneysteve]

So if my normal APR said 12.99%, and I pay whatever I want even only the minimum during the 0% APR period, it will have no effect on my interest rate later, did I understand correctly?

Correct.

If it's interest free, why pay them in full instead of keeping it in the bank and paying them right before interest kicks in?

That's fine. Just don't wait until the very last minute because if your payment is late by just one day, you'll get socked with the accrued interest for the whole promo period. Pay it off a couple of weeks early to be totally sure it doesn't get screwed up. I'd also advise paying electronically, not by snail mail. And check your account to be sure the payment was received and properly credited.

[JoshuaHeckathorn]

I agree with Steve - playing the 0% promo game is fine as long as you're cautious and make certain you don't get screwed. My original point was that too many people start out with good intentions and end up really pissed when they have to pay accrued interest for the whole 6 months. If you know you would never allow that to happen, then good for you.

[maat55]

Why play with snakes? 0% is bait for idiots. Just should pay your bill and ignor the bait, IMO.

[Slug]

I agree with Steve - playing the 0% promo game is fine as long as you're cautious and make certain you don't get screwed. My original point was that too many people start out with good intentions and end up really pissed when they have to pay accrued interest for the whole 6 months. If you know you would never allow that to happen, then good for you.

I'm with Steve too. If you have any kind of self-discipline, you end up making interest on the $ you don't have to send to the CC for 5.5 mths. Heck, as soon as you get the card, head over to the US Mint website and buy some of their direct ship $1 coins and deposit them in your savings account. That's like getting the interest on a 6mth CD of whatever denomination you choose for free (Note that this does now violate the TOS of the US Mint :-)

[disneysteve]

Why play with snakes? 0% is bait for idiots. Just should pay your bill and ignor the bait, IMO.

I understand this but at the same time realize that there are people who can use these things to their advantage. If you have the discipline to play the game and win, why not play? 0% deals should only be used by those who are in full control of their spending and finances. And you should have the money sitting somewhere ready to pay that bill when the time comes. And you should be closely tracking due dates and making sure everything is paid on time and in full.

Just because something is potentially dangerous doesn't mean nobody should ever do it.

I've made thousands of dollars from my credit cards over the years and never paid a penny in interest or fees. I see nothing wrong with that. Heck, I think it would have been stupid for me to not take advantage of all of those offers.

[maat55]

I understand this but at the same time realize that there are people who can use these things to their advantage. If you have the discipline to play the game and win, why not play? 0% deals should only be used by those who are in full control of their spending and finances. And you should have the money sitting somewhere ready to pay that bill when the time comes. And you should be closely tracking due dates and making sure everything is paid on time and in full.

Just because something is potentially dangerous doesn't mean nobody should ever do it.

I've made thousands of dollars from my credit cards over the years and never paid a penny in interest or fees. I see nothing wrong with that. Heck, I think it would have been stupid for me to not take advantage of all of those offers.

You know me, I'm very conservative. Though you are right, I'm betting the odds are in my favor as far as those who will play the game properly.

I guess it does not hurt to get both points of view.

[heidrek]

from my experience, if you get a low interest rate, you're almost always stung with membership fees or other punitive measures. Low interest is fine if you have large balances, but if you routinely pay off your card go for a low fee card instead.

[disneysteve]

if you routinely pay off your card go for a low fee card instead.

Generally true, though if a card does have an annual fee, check what you get in return. Some premium cards provide added services that are worth more than the fee. For example, my Marriott Visa charges $65/year but gives me one free night certificate each year that is worth up to about $300 depending on where you use it. My wife and I use it to do a nice get-away weekend each year usually for our anniversary. So for $65, we get to stay in a luxury hotel. Also, the premium card earns more points per dollar spent than the regular card with the lower fee so we accumulate free nights much faster.

[kv968]

I understand this but at the same time realize that there are people who can use these things to their advantage. If you have the discipline to play the game and win, why not play? 0% deals should only be used by those who are in full control of their spending and finances. And you should have the money sitting somewhere ready to pay that bill when the time comes. And you should be closely tracking due dates and making sure everything is paid on time and in full.

Just because something is potentially dangerous doesn't mean nobody should ever do it.

I totally agree with Steve. As long as you have the discipline to go through with it, deals such as these can be very advantageous. I bought my last, and current, tv's using an "18 month 0% APR" and it's worked out great since I paid the minimum payments on time and paid in full at the end.

One thing you do want to watch with these types of offers is if there's a "universal default" clause associated with it. With that, the issuer of credit can start charging you the default rate of the promotion if you've been late on any of your other lines of credit even if you've been current with that particular card. I'm not sure if the new laws have addressed this practice but they have ways of wording it to get around it if it.

[wincrasher]

It is like swimming in the shark tank. If they don't bite you, it can be fun!

[JoshuaHeckathorn]

One thing you do want to watch with these types of offers is if there's a "universal default" clause associated with it. With that, the issuer of credit can start charging you the default rate of the promotion if you've been late on any of your other lines of credit even if you've been current with that particular card. I'm not sure if the new laws have addressed this practice but they have ways of wording it to get around it if it.

The CARD Act does ban "universal default" along with "double-cycle" billing as well.