Many people think that all a 0% credit card is good for is to trade off a balance from a high interest card to the 0% one and save a bit of money on interest. True, on a card with a balance of 5000 GBP having a 12% per annum rate the interest comes to 600 quid yearly. That 600 could be used to pay down the principle quite nicely. But what about using that 0% credit card differently? What if one were to use that card to purchase an expensive item that otherwise might have a 12 to 18% interest rate attached to it? What would that be, you wonder? A car would be one option. Home improvement would be another. In the case of the automobile, you could purchase your midlife sports car for the ten thousand and not have to pay a penny on it for up to 15 months. As soon as the free interest term on the card expired you could either acquire conventional financing for the auto or simply pay the minimum payment the card requires. Basically this would give you the world’s lowest car payment. This is a bit of a procrastination technique but when one is watching interest rates for rises and falls sometimes waiting is the best choice. Of course a car is a depreciating asset.
Suppose we use our 0% credit card for a home remodel. There things take a bright turn. You would like to fix up the old homestead but you lack sufficient equity in your home for a remortgage. If you could finance the remodel at 0% over 15 months you would have time to both create equity through the improvements and achieve equity through appreciation. Now you can qualify for permanent financing or an home equity loan. 0% interest can be a fabulous tool to bridge short term financing dilemmas. It allows you to move quickly on large purchases at low prices that might be missed while waiting on a conventional loan to be approved or to wait out short term economic trends.
