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A few weeks back I asked a question about getting a new credit card, and the answers were very helpful, but I came into some new information that I at the time I had not realized.

My credit card appears to be under a 15 month period of no interest.

Does that change the usefulness of the card during this period? Is it more acceptable to use the card as a hassle-free loan if I know I am going to be able to pay it off well before the no interest period runs out?

All answers are very much appreciated.

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    Are you 100% sure this is for new purchases? Often times that is for balance transfers only. – Pete B. Sep 6 '16 at 12:57
  • I believe this is your original question, just for reference to your comment: money.stackexchange.com/questions/69581/… – BobbyScon Sep 6 '16 at 12:58
  • Yes, new purchases are included in this. Also, I've included a link to that question as it is my original question. – Ranma344 Sep 6 '16 at 13:05
  • As a fore-warning, I've tended to notice that 0% APR Purchase CCs have a generally lower credit limit in comparison, although this might vary by the servicer.3k-6k is the typical range I see. Additionally, some cards might still have a minimum monthly payment, and the terms may specify that at least this amount must be paid or your introductory rate will be revoked and the card will revert to using the standard rates. – Shorlan Feb 22 at 0:05
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Does that change the usefulness of the card during this period?

It might. It's not quite like being able to pull $5000 at once and use it to pay off a high rate card (although that may be an option for a one time fee) or to take the money as we did in the old days and buy a 12% CD.

If you have a planned purchase, and were saving towards it, you can use the card to buy it now, and pay it off at no cost. The fact is, rates are so low, that if there's no high interest debt to pay, your savings isn't likely to be earning much interest anyway. Be sure you make the minimum payments required and are ready to pay in full when the 0% goes away.

One issue - as I recall, this is your first card. We generally advise to keep the statement balance to less than 20%, or even 10% of available credit, above that will impact your credit score. The good news is that if you max out the card, buy your furniture, and pay it to zero at the end, your credit score will right size itself. Just be aware, and don't panic. In my own experience, I saw just under a 50 point hit, from 800 to 750 for excess utilization (above 30%) and those points came back as the zero loan was paid down.

Is it more acceptable...?

That's a judgement call. One camp says "don't buy it if you can't pay cash, or balance in full each month." I'm from the position that "knowledge is power" and as long as you aware of the costs involved in your decisions, the result can be rational. e.g. "I'm willing to pay $xxx interest over a year's time so my apartment won't embarrass me when a guest comes over." Debt and interest aren't evil, interest is a choice just like dinner and movie vs cooking at home is. What I do warn about is to avoid the permanent card balance, so a purchase at age 23 isn't still being paid off in your 50's. I've seen that, it's not good, by any means.

  • This answer makes a lot of sense. It puts many things into perspective for me. I plan on paying the card off within a month or so, basically I used it as a short term loan to get what I needed for the apartment, but I also allocated money that I would normally save in my budget to be used for paying off the card in a timely manner, so as to guarantee there would not be anything left after a maximum of two months. – Ranma344 Sep 6 '16 at 14:31
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    I wish your last paragraph could be made a reading requirement for everyone on this site. – TTT Sep 6 '16 at 15:57
  • Just to clarify, when you say the statement balance, do you mean how much is due at the end of the month, or how much you carry over and do not pay immediately? I am having trouble telling if you are saying one should not use more than 20% of the card limit or just that it should be paid down to at most 20% each month for a first card. – Vality Sep 6 '16 at 19:20
  • Say the credit limit is $5000 (and this is OP's first card, so $5,000 is his total available credit. Having the monthly statement show above $1000 will have a negative scoring impact. Balances are reported when the bill is cut, not during the billing cycle. In OP's case, he can pay over 12 months, but my note was just a friendly warning, no need to panic, it will go away a month after he's paid off. – JoeTaxpayer Sep 6 '16 at 19:27
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All-in-all this does not change much in the answers already received. The principles still hold true for the best answers. My answer, to the original question, pointed out that people tend to spend more when they use credit cards over cash or even debit cards. The psychology behind this is exaggerated by the length of time you have to pay back at zero percent interest. I would say that you have a much higher likelihood of spending more with these factors.

If you decide to use the entire interest free period to pay back your purchases, you are increasing the risk of late payments or income reduction (thus leading to late or missed payments). One article I read asserted that the reason most people end up with punitive credit card rates (more than 18%) is by starting out with a zero percent loan and having a negative payment history.

Both of these issues can be offset by having the money in savings prior to purchasing the desired items.

  • 1
    exasperated? do you mean exacerbated? I'd edit, but that would be presumptuous. – JoeTaxpayer Sep 6 '16 at 14:35
  • And, a +1 for the simple fact that money is not all numbers. Your answer is about behavior, judgement, and bad decisions. Warnings that should always be remembered. – JoeTaxpayer Sep 6 '16 at 14:52

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