Are 'no interest if paid in in x months' credit cards worth it?

Question

My current laptop is dying the slow death, specifically the charging circuit in the motherboard is failing; the battery charges in another laptop of the same model. I've considered just running it on the wire forever, but as I often have to go out to job sites where I'm not guaranteed an available plug, that's not completely possible.

To the point though, I need a new laptop; unfortunately, being something I use for work, I can't really go without one forever. I don't have the resources on hands to buy one outright, and don't have time to save up. My question is, are those "no interest if paid off in x months" legitimate? I know it's always a hazard to rely in future income, but I plan on paying it off well within the prescribed period.

Any advice would be greatly appreciated, Thank you.

Answer 1

You can't buy it outright. You can't take the time to save up.

if the remaining choice is between a card that charges from day one, and a card with this kind of grace period, the grace card is the better choice. Plan wisely, pay it in full before that rate starts to be charged.

One additional note - There are two groups of people, the pay-in-fullers and the balance carriers. I believe that one should pay in full, and never pay interest.

A zero rate offer can be used by the balance carrier to feel great for 12 months, but have even more debt after the rate kicks in.

As a pay-in-full user, I've used the zero rate to throw $20K at the 5.25% mortgage, and planned a refinance to 3.5% just as it ended. a $750 savings (after the tax effect) well worth the bit of effort.

The fees should be in the fine print. My zero rate had a transfer fee, $50 max, which was nothing in comparison to the savings.

Answer 2

It has been reported in consumer media (for example Clark Howard's radio program) that the "no interest for 12 months" contracts could trick you with the terms and the dates on the contract.

Just as an example:

You borrow $1000 on 12/1/2013, same as cash for 12 months. The contract will state the due date very clearly as 12/1/2014. BUT they statements you get will take payment on the 15th of each month.

So you will dutifully pay your statements as they come in, but when you pay the final statement on 12/15/2014, you are actually 14 days late, have violated the terms, and you now owe all the interest that accumulated (and it wasn't a favorable rate).

That doesn't happen all the time. Not all contracts are written that way. But you better read your agreement.

Check for:

• The due date
• The penalty dates
• How you must pay
• Where you must pay
• Are there prepayment penalties?

Some companies use the same as cash deal because they want to move product. Some do it because they want to trick you with financing. Bottom line is, you better read the contract.

Answer 3

I too am a full-monthly-statement-balance payer and I received a balance transfer offer from my credit-card company. This one was quite different from many others that I have read about on this forum.

I could do a balance transfer for any amount up to $X from another credit card, or use the enclosed "checks" to pay some other (non-credit-card) bills, and I would not have to pay any interest for 12 months on the amount thus borrowed. But,

• There would be a 2% service charge on the amount I was borrowing. This amount would be billed on the next monthly statement, and it would have to be paid in full by the due date of that month's payment, that is, within the 25-day grace period allowed for payment of monthly statements. Else, interest would start being charged on the unpaid part of the service charge at the usual humongous rate of H% per month.

• If I had not paid the previous month's balance in full, I would be charged interest at H% per month on the service charge starting from Day One; no free ride till the due date of the next month's statement. Of course, the balance carried over from last month would also be charged interest at H%.

• If I had paid last month's bill in full, but there were any other charges (purchases) during the current month, then unless the entire amount due, this month's purchases plus service charge and that "interest-free-for-twelve-months loan" balance was paid off within the 25-day grace period, my purchases would be deemed unpaid and would start being charged interest.

In short, the only way to avoid paying interest on the amount borrowed was to start with a card showing a $0 balance due on the previous month's statement, not make any charges on that card for a whole year, and pay off that 2% service charge within the grace period. It might also have required that one-twelfth of that interest-free loan be repaid each month, but I had stopped reading the offer at this point and filed it in the round circular file.

In short, while @JoeTaxpayer's tale of how "As a pay-in-full user, I've used the zero rate to throw $20K at the 5.25% mortgage" is undoubtedly how things worked once, it is not at all clear that they still work that way. At least, they don't work that way for me. Heck, once upon a time, for a period of about 3 months, you could earn 1.5% interest per month from the credit card company by overpaying your credit card bill considerably. Their computers then just "added on" 1.5% interest by multiplying your credit balance -$X by 1.015 and so you got 1.5% per month interest from the credit card company. The credit card agreements (and the software!) got changed in a hurry, and nowdays all credit-card agreements state in the fine print that if you overpay your bill, you don't earn any interest on the overpayment.

Answer 4

No, because of the balance transfer fees, which could be 4%. Unless of course you get a deal for 12 months of no payment, and you pay it back in 12 months, in which case a 4% annual interest rate is much less than a loan! At that point you are gambling that you will be responsible with the payments, and the card company is taking the opposite bet.