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An upcoming purchase (nearing $10,000, in the US) would drain savings more than I'd be comfortable with, and I'm wondering if using a zero-interest card to effectively spread out that purchase for 15-20 months would be sensible.

This is for a non-emergency but necessary medical expense.

There does not to appear to be any chance of not paying that balance off before the interest-free period expires. We have good general bill-paying discipline and I'd probably just automate the payments and get it to zero with some time to spare.

What I'm unsure of is: could I run afoul of unexpected "fees" or other costs? Would this affect my credit rating? I have no other recurring debt; all other credit cards are always paid off in full.

This seems to be quite different from a zero-interest balance transfer scenario.

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    Another thing to consider is using a credit card that awards points. Those usually have some amount you have to spend upfront. If math on your interest rate vs the number of points works out, it might mean more money for you than 0 interest! – C0D3LIC1OU5 Apr 16 at 23:11
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    The premise here is that a drain of $10000 at one time is more than the OP is comfortable with. With that, the points may not be a better option because the payment would be delayed by at most 45 days. – perennial_noob Apr 17 at 2:11
  • Important fact: While they are interest free, all the ones I have seen charge a 1 time flat fee and in my experience usually 3% or $300 on 10,000. – cybernard Apr 18 at 13:21
  • @cybernard you're talking about balance transfer cards which is also an option. However I think the OP was talking about 0% Purchase APR cards. Either case, it is good to keep a look out for fees. – perennial_noob Apr 18 at 18:32
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    If it's a necessary medical expense and you're in the US, the amount you pay out of pocket (for total expenses throughout the year) should be capped by law at $7900. – R.. Apr 18 at 20:06
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I want to make a note of something for other people that find this question and may have other purchases or cards in mind. With a card that is accepted everywhere (VISA, MC, Discover, etc) when you get a zero interest introductory offer for say... 18 months, you will not pay any interest for 18 months and then start paying interest on any remaining balance after that period. So, if you make a purchase for $2000 and pay $100 every month, you will end up paying interest on $200 after the 18 months.

Many store credit cards DO NOT work this way. For instance, let's say I go to Best Buy (not specifically picking on them, random example) and buy a fridge for $2500 and get "no payments and interest for 24 months" on my Best Buy store credit card. Then let's say I plan on making $100/month payment, but maybe I start making payments late or I forget one month or whatever. Well, interest starts to accrue on the entire $2500 and keeps getting calculated on the remaining balance every month. If you pay it off in the 24 months, that accrued interest goes away and you truly pay zero interest. However, if you go past that 24 month date by even a month, you pay the ENTIRE back-interest that has been accruing since day one (and it's a very high rate).

So, for store credit cards, always plan on paying off the purchase several months early, or use another way to pay that doesn't have such high risk.

As an example, I looked at the application page for a Home Depot store credit card. Applications usually have a lot of disclosures, so its a good place to find details like this and the Home Depot card always has this promotion. Sometimes it's extended to 12 or 24 months, but you always get the 6 month no interest "deal": PROMOTION TERMS: NO INTEREST IF PAID IN FULL WITHIN 6 MONTHS on purchases of $299 or more. Interest will be charged to your account from the purchase date if the purchase balance is not paid in full within 6 months.

It sounds clear when it's singled out like this, but it's not as noticeable when you need a new washing machine and there are flyers and banners touting "NO INTEREST 18 MONTHS!".

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    Wow, that is evil. Thanks for pointing that out. – Ruther Rendommeleigh Apr 16 at 15:57
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    @RutherRendommeleigh I believe that in some areas the "no payments, no interest" have been banned because of it, but that doesn't stop them from requiring low monthly payments that have the same effect of promising no interest but then charging it anyway because an excited customer didn't read the fine print. – JPhi1618 Apr 16 at 15:58
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    Source for this? That seems outlandish and crazy. – dwjohnston Apr 18 at 5:21
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    @RutherRendommeleigh It is not evil, it is wild capitalism. The evil is in conditioning people to never read fine print (and never forcing contracts to be printed in the same font size throughout its entirety) – Mindwin Apr 18 at 12:54
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    @dwjohnston, Here is a example I found at Home Depot. If you read through the disclosures, you come to a paragraph: PROMOTION TERMS: NO INTEREST IF PAID IN FULL WITHIN 6 MONTHS on purchases of $299 or more. Interest will be charged to your account from the purchase date if the purchase balance is not paid in full within 6 months. You can find the same wording on many in-store cards. I've never seen this on a store card that was also VISA or MC. – JPhi1618 Apr 18 at 14:24
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Looking at the intended expense, it's (in my opinion) as if you asked "For a non-discretionary expense, do we tap our savings or take advantage of a zero-rate offer?"

The only advice, aside from discussing the card itself, is to suggest you ask the doctor/hospital if they offer either a discount for quick payment in full, or a payment plan at no interest. There's also a chance they can reduce the bill itself, if you have no insurance.

You seem to have addressed the card itself. The warnings are usually about the mistake along the way. One missed/late payment, and you'll owe interest, typically 24%, until it's paid off. By setting up an auto-pay and being 100% sure it's working, you'll be fine.

As far as credit report goes, it will appear as a debt, and your utilization will drop as you pay it down. Once paid, the impact fades quickly, as this is one of the scoring factors that's near real-time, in comparison to credit inquiries (2 years) or missed payments (7 years on report).

  • Comments are not for extended discussion; this conversation has been moved to chat. The last comments have shifted away from the main question, members can continue in chat. No further comments will be allowed on this answer. (Except for Jimmy’s which is 100% good info) – JTP - Apologise to Monica Apr 16 at 16:25
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    On the subject of credit ratings, paying off a large debt without missing payments can really enhance your credit rating especially if you have very little credit history. – JimmyJames Apr 17 at 16:45
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If you have the resources and the discipline to be sure that you can pay that loan off before interest is charged, the no-interest credit card is the better way to go.

Normally, you should not put a charge on a credit card which you cannot afford to pay for with cash equivalent at the time of purchase, because the amount with interest that you'll likely wind up paying is much higher. This post has some good advice.

However, there is generally value in aligning your expenses with the timing in which you will receive the benefit of those expenses, especially when there is not an interest cost. For example, if someone offered me a no-interest 25-year loan with regular monthly payments on solar panels guaranteed to last and perform for that long or longer, I would take that even if I had more than enough in the bank to cover the cost up front.

Sometimes, life events happen that require quick liquidity of assets, with expensive consequences if you don't have that flexibility available. By having this medical expense on a no-interest loan and keeping the savings secured in the bank, you are buying time to find creative solutions to deal with those situations should they come up, and in this case you're getting that for pretty much free thanks to the credit card promotion.

Will this affect your credit? Somewhat, but temporarily, especially if you manage it well (in which case it'll help you long term). If you're planning to apply for a mortgage (or other large interest-bearing loan) while the account would still be new and the balance would still be high, especially if you don't have a lot of available credit to keep overall revolving loan utilization low, this might be a bad idea and cost you more in the long run, particularly if your credit score is close to some threshold that would lock in different interest rates for a longer-term loan. But if you'll have it paid off before applying for that big loan, you're likely better off having proven you can manage credit well instead of having tapped savings.

As far as other fees, read the terms of the card carefully. Use of balance transfer / account access checks often incurs a fee of ~2% of the amount of the transaction, and if you're signing up for a new card advertising "no annual fee" be sure that's a permanent thing and not just "no annual fee for the first year, then $495 per year thereafter" or something like that. Usually this sort of fine print is not too long and those terms are not too hard to find as long as you're looking for them.

Also be sure you know what happens if you miss or are late on a payment, and don't do that. Sometimes, if you are even a bit late on one payment, you lose the no-interest promotion and have to pay the full amount of interest at the credit card's penalty rate, sometimes even retroactive to the time the purchase was charged. This is where the discipline of always making your monthly payment on time makes a huge difference.

Note that medical costs are a leading cause of bankruptcy in the US, and if some other unfortunate situation does land you in financial trouble, it is often easier to deal with medical debt as medical debt instead of as credit card debt. Working out a monthly payment plan with the medical provider, including trying to negotiate the overall price to be lower even with that plan, is probably a very useful first strategy, with the credit card option as a backup. It may even be better to forego points bonuses on a credit card to keep the debt as medical instead of credit card and have better financial flexibility with the savings.

Note: This answer on a related question may also be of interest.

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    I would add that these days it's a rare medical procedure that doesn't have surprise charges, often quite large ones. And there isn't much chance of avoiding them, as you're rarely in shape to check that every single person you interact with is actually covered by your insurance. So borrowing the money would seem like a really good way to make sure you actually have enough money.. – user81981 Apr 16 at 22:26
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    +1 Definitely stay aware of when payments are due. You are most likely responsible for making minimum payments even if you have not received a statement telling you what is owed and when. I ran into this very problem once. I never received the first statement, but was still liable for that payment. In that case, the interest and penalty for that period kick in. This can be a substantial amount, and, of course, the interest free terms no longer applied. – Jim Apr 16 at 23:49
  • @Jim I recommend making at least the minimum required payment twice a month (or every time you get paid.) This makes it a lot less likely you get snagged by this. For example, you make alternate minimum payment and substantial payments every 2 weeks. – JimmyJames Apr 17 at 19:39
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Yes, pay it all off within the allotted zero-interest window and you will pay no interest.

If you plan to miss a monthly payment or plan to pay less than the requested monthly then make sure to read the fine print or else you will be shafted, period.


I offer you an additional option:

If you have good credit and are willing to drop your score by 10-20 points then apply for as many sign up bonus credit cards as you can comfortably manage; see https://www.moneyunder30.com/credit-card-cash-sign-on-bonuses

Make sure to only sign up for cards with no annual fees!

Many of these have 0% intro rates and they can offer huge bonuses when you spend a minimum within the first 3 months. I've personally signed up for several cards under the terms of "Spend $500, get $150" and then never use the card again. The ROI (30% in my example) of these terms are unmatched by even the best stock options.

In theory, you could pay your $10,000 bill and get back $2,000-$3,000 for doing so.

  • Also, ensuring these have no annual fee is super important, if pursuing this route. – perennial_noob Apr 18 at 18:21
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The answer is probably, and the gain can be quantified by dollars by calculating the present value of an annuity.

Assuming 20 payments of $500 each month, and a 0.487% monthly real return (which corresponds to a 6% annual return), the present value of that annuity is $9506.65. This can be calculated in a spreadsheet with the function PV(0.00487,20,500).

In other words, the option of paying with an interest-free credit card is about $500 cheaper. Of course you've paid $10,000 in the end either way, but by paying later you'll end up with $500 in investment returns which you won't get by paying the full $10,000 today.

So unless you can find some other payment strategy that saves more than $500 (cash rewards card, negotiated discount for immediate payment) the interest-free card is the way to go.

Do be very careful to avoid any late payments. Review the terms carefully: often one mistake makes the entire interest due retroactively.

If the terms allow you to make a $10,000 payment at the end of 20 months rather than smaller payments over the 20 months, you can do even better: the present value is then only $9,074.08. So if the terms allow it and you have the discipline to save and invest the money for 20 months you can save about $1000.

Your debt to credit ratio is a significant factor in your credit score, but the negative impact goes away almost immediately after paying off the debt. Some banks have a free credit score check tool online that allows testing hypothetical situations like this, so you might be able to see just what the impact would be. In any case, unless you anticipate needing new credit before paying off the debt I wouldn't worry about it.

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What I'm unsure of is: could I run afoul of unexpected "fees" or other costs?

The main fees would be if you're transferring a balance (very rarely, credit cards will offer not only a 0% interest rate but also a 0% transfer rate), and if you miss a payment. And if it's something like "no interest on purchases made in the first three months", you should look into whether payments go towards the zero interest purchases first. If you have $5000 accruing 0% and $100 accruing 24%, and you make a $200 payment, you don't want them saying "oh, we'll apply that entirely to the $5000 and leave the $100 gathering interest".

Would this affect my credit rating?

Probably. Part of your credit score is credit utilization, so if all your credit cards are maxed out, that will decrease your score. You mentioned other credit cards, but if you didn't already have other credit cards, you should see about getting them, both because that will decrease your utilization ratio (same utilization, but divided by larger total available credit) and because it will be harder to get credit cards once your other ones are maxed out.

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    I believe the standard with the cards in the US is that they'll apply any portion upto the minimum payment on the lowest interest portion and then anything over the minimum payment gets applied starting with the highest interests. – perennial_noob Apr 17 at 2:03
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    @perennial_noob I'm fuzzy on the details but I believe rules on this are now regulated under the Credit CARD act of 2009. – JimmyJames Apr 17 at 17:01
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    @perennial_noob is correct. The CARD act regulates this in the manner he described. Payment portions above the minimum are now required to be applied to the high interest rate balance.. – doug Apr 18 at 6:37
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One point that has not been addressed in the other answers is the manner of payment and how it affects how the payments are posted.

There are many different credit card offers out there. Some offer balance transfers (without transfer fee to those with poor credit, and transfer fees of up to 5% or more to those with stellar credit) with 0% interest on the transferred balance or on transferred balances and new purchases for n months where n can be anywhere from three to eighteen months (old purchases and new cash advances continue to be charged interest until paid off) etc. Now, by law (CARD Act of 2009), the minimum payment shown on each monthly statement must include all the fees charged during the previous month plus all interest (finance charges) for the previous month plus enough of the balance owed so as to ensure that the credit card is paid off in full in a reasonable period of time. Credit card companies seem to universally interpret this requirement as 1% of the balance is enough, and 100 months is a reasonable length of time in which to finish milking this cash cow.

But, also by the same law, if someone makes the minimum payment (in timely fashion), then the credit card company is free to apply that payment to any part of the balance; it is only the excess over and above the required minimum payment that must be applied to paying off that part of the balance that is being charged the highest interest rate, and then the next highest interest rate, and so on till all the excess is used up. Most credit card companies apply the minimum payment amount towards paying off the 0%-interest balance. So, if someone has a previous balance (to which the 0%-interest offer does not apply) as well as new purchases which are not being charged interest at all, then making only the required minimum payment means only the new purchases are being (slowly) paid off while what is owing on previous purchases continues to grow as interest continues to be charged on them. One has to make more than the minimum payment due (and make it in timely fashion too) to make a dent on those previous charges; else there is a nasty surprise waiting when the 18 months (or whatever period is on offer) of 0% interest are up.

  • This was addressed in comments but also this doesn't directly answer the OP. There does not to appear to be any chance of not paying that balance off before the interest-free period expires. We have good general bill-paying discipline and I'd probably just automate the payments and get it to zero with some time to spare. What I'm unsure of is: could I run afoul of unexpected "fees" or other costs? Would this affect my credit rating? I have no other recurring debt; all other credit cards are always paid off in full. So it looks like paying minimum + more is not the issue – perennial_noob Apr 18 at 19:57
  • @perennial_noob Thanks for the down-vote and I disagree that paying minimum plus more is not an issue. Even if the OP is making more than the minimum payment but less than the full statement balance, he is going to find at the end of the 18 months that he has not been paying off previous balances as much as he thought he was. His statement "We have good general bill-paying discipline" is less confidence-creating than "We have always paid our credit-card bills in full on time" and I do address his query "could I run afoul of ... other costs? Also, I did say "not addressed in other answers. – Dilip Sarwate Apr 18 at 20:09
  • The whole line: We have good general bill-paying discipline and I'd probably just automate the payments and get it to zero with some time to spare. Taken with An upcoming purchase (nearing $10,000, in the US) would drain savings more than I'd be comfortable with does give a strong sense of confidence. The card has 0% interest, so whatever purchases are put on it still have 0 interest. At the end of 18 months of equal payments amounting to $10k there would be no discrepancy in amount paid off vs expected. What you're saying would apply if there are already existing balances at higher APR. – perennial_noob Apr 18 at 20:20

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