Would you like some free money? I know I would. Of course, there is no such thing as a free lunch and there’s no such thing as free money either – unless a rich relative dies and leaves you a big chunk of cash. However, I ran across an article the other day on USA Today that got me thinking about how you could use credit cards to get a sort of “free” money.
0% interest balance transfer cards
If you need some debt relief assistance, here’s something to consider. Almost every credit card provider is now offering 0% interest balance transfer credit cards. The way these work is that you transfer balances from high interest credit cards to one of them and then pay no interest for anywhere from 12 to 18 months, depending on the card you choose. For example, Chase is offering a 0% introductory rate that lasts until August 1, 2014 on balance transfers and purchases. This credit card also has a zero dollar balance transfer fee if you transfer balances during the first 60 days after you open the account.
How to use one of these cards
The best way to use one of these cards is to completely pay off your balance before the introductory period expires. It should be fairly easy to do this because you’re not paying any interest. Your entire payment each month will go to reducing your balance. Let’s say you transfer balances totaling $12,000 to a 0% interest transfer card that had an 18 – month introductory period. If you are able to pay $666 a month, you will have completely paid off your balance before your introductory period ended and will be totally debt free.
Watch out for transfer fees
If you can find a good deal on a 0% balance transfer card like the one from Chase that has no transfer fee, that could be your best bet. Some of these cards charge as much as 3% of the balances transferred. If you were to transfer $10,000 to the new card, this could set you back $300, which might offset some of the savings you were going to realize from making the transfer. You should also make sure you understand what debt can be transferred. For example, some will allow you to only make transfers from other credit cards while others will allow you to transfer balances from store credit cards such as a Macy’s or JC Penney card.
What happens after introductory period expires
No surprise – when your introductory period expires, you’ll have to start paying interest again – unless you’ve paid off your entire balance. And in some cases, this interest can go as high as 20% depending on your credit worthiness.
The second way to get ”free” money
If you need to purchase a big-ticket item, some stores will give you 18 months interest free to pay for it. For example, Apple was recently running one of these offers where you could take 18 months interest-free to pay for one of its computers. You may be able to find other stores such as Sears with the same kind of offers. However, spoiler alert, with most of these offers its important that you pay back the money before your interest-free period expires or you could be charged interest retroactively back to the day you made the purchase, which could come as a very unpleasant and expensive surprise.