Why you need to be careful with 0% introductory offers

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Recently, a friend of mine bought a house and learned the hard way that owning a home means taking on a world of unplanned expenses. Thanks to a string of immediate home repairs, she found herself in a situation where she needed to finance a furniture purchase or otherwise potentially spend her first few months in her new home without a kitchen table. (She actually does have some money in savings she can tap, but she wants to reserve that cash for emergencies.)

Right before buying her home, my friend decided to apply for a credit card with a 0% introductory financing offer. She then used her new card to cover the cost of her furniture. Since she gets an 18-month reprieve on paying interest and she saves money from each paycheck she receives, there’s a very good chance her balance will be paid off in full by the time her introductory period comes to an end.

But not everyone is in a position to pay off debt so quickly. And that’s why you need to be careful with 0% introductory credit card offers – especially these days, with interest rates rising.

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Don’t get stuck paying more

The appeal of the 0% introductory rate is simple, because it’s basically a free pass to pay no interest for a certain period of time. You may decide to take advantage of one of these offers if money is tight right now but you’re expecting a near-term windfall (like a bonus at work or tax refund). Or, you may decide to use a 0% introductory rate credit card for purchases you can pay for out of savings so you can leave your money alone and let it earn interest.

However, while jumping on a 0% financing offer may be a good move for some people, for others, it can be a dangerous thing – namely, because you could easily get stuck with high interest charges in the event that you don’t pay down your balance before your introductory period comes to an end. In fact, you may find that the interest rate you face on a card with a 0% introductory offer is higher than the interest rate on your other credit cards.

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Furthermore, credit card interest rates are currently on the rise due to the Federal Reserve raising interest rates. And so if you charge expenses on a 0% introductory rate card and you don’t pay your balance off in full by the time that intro period expires, you could really wind up losing a lot of money to interest over time.

Don’t get in over your head

A 0% introductory offer might seem tempting. But resist the urge to finance a purchase at 0% interest unless it’s really necessary.

In my friend’s case, she charged her expenses on a credit card because she wanted to maintain better cash flow, and because she knows she commonly saves enough money each month to pay off her balance before her 0% APR period wraps up. But if you can’t say the same, then it’s best to steer clear of these offers, enticing as they might be.