By Harry Stoll
If everything is hunky dory with your credit cards—paying the balance each month, paying on time, and keeping expenditures below 30% of your available credit, and whatever I’ve been nagging you about—you can get a card charging you 0% interest on purchases for a specified period.
That’s right, 0%. Their motives are not altruistic, what did you expect? They hope you’ll put everything on the card; it’s a cuddly stuffed tiger that could morph into the monster under your bed.
Since I advocate paying credit card debit in full each month, why would I recommend a 0% credit card? Because that classic bumper strip is right, things happen. The roof she is leaking and the rain is coming in, or your car’s oil leak is more than a bother. Or it could be something enjoyable: a vacation or a root canal.
You might see ads about them or go online and enter “0% on purchases” and be inundated. Of course, that’s the easy part. The essential part is figuring out how you’re going to pay the piper because at the end you’re going to dance to his tune.
You should have funds to pay for your purchases immediately from an interest bearing account (You have one, right?). But you can open a 0% on-purchases card and keep funds in the interest bearing account. If you make one big purchase you divide it by the number of months of the 0% and set up automatic payments from your bank account. Or, if you are very sure of yourself you can make the minimum payment until closing time when you have to pay the bar tab.
Eve if you have not yet arrived at the ideal state of paying the balance in full each month, and are still paying interest (but working toward the ideal goal), the 0% balance card can be useful, but with all credit cards, danger lurks.
Sometimes the offer includes a pitch for a balance transfer at 0% interest. The catch is they charge you a one-time fee, typically 3% or 4%, which ends being more because you pay it up front; and then poof! It’s gone and won’t come back even if you pay it off tomorrow. So don’t go there.
I keep seeking interest-bearing accounts. Patelco Credit Union (membership available to anyone who lives, works, goes to school, or worships, in Contra Costa County) offers a money market account of 3% on the first $2,000.
It goes down from there until it reaches the puny amount most banks pay, but for $10,00 the “blended interest” is 1.7 %, which is more than the current inflation rate. Depositors are limited to six withdrawals a month. The deposit is federally insured. it can change it any time, without notifying you.
Or you could get a CD. Bankrate.com lists several with an annual percentage rate of about 1.2%. That could be ideal to stash money for your 0% purchase card. A CD rate can’t change (but there are penalties for early withdrawals).