Use Credit Cards to Buy Items that You Will Pay over Time
Written by Dongmiao Cui   
 
Credit cards are great to buy things that you will pay over time if the interest offered to you is very low, or close to 0%. Here is an outline of some scenarios when it is suitable to use credit cards for purchases that you intend to pay over time.


Taking Advantage of The 0% APR for Purchases Offers

There are times when you need to buy something necessary, such as a computer for college, or a new suit for a job interview. If you need to pay for them over time, it would be a good idea to use a 0% APR credit card. Many credit card companies offer such promotion for the first 6 months to 1 year, with a few up to 15 months. For a list of current offers, you can see our updated list of 0% APR credit cards for purchases and balance transfers.

Using the 0% APR credit cards as starting capitals is also a good choice for small businesses. Many new businesses (and a huge percent of start-up's out there) are struggling with initial funding for the first couple of years. Some expenses, such as wages to employees, can't be deferred but other purchase expenses can well be pushed back by using some of the generous 0% APR offers. More and more new start-up's are funded by their founders maxing out their credit cards (yes, even Google!) instead of seeking venture capital funding, which is no longer as easily available as before the dotcom bust in the late 90's. This option can help a sound business better manage its working capital!

However, 0% APR DOES NOT mean thumbs up for reckless shopping spree! Even if you are taking advantage of the 0% APR promotions, make sure you pay the monthly minimum balance amount. One missed payment means automatic termination of the promotion and you will be bumped to the 20% or perhaps higher APR.


0% Financing And $300 Off Your Purchase

Many times you are offered a special option when you go to department stores, especially for furniture, home appliances, and big electronics: either a 0% APR and no payment until next year OR $300 (or some dollar amount) off! This resembles the high school math problems that require a calculator and paper to figure out which one is better suited to your needs. However, there is actually a third option available.

Third Option: take the $300 off and use a 0% APR credit card. You can get the dollar amount taken off immediately at the cashier. At the same time, you don't need to worry about the payment (except for the monthly minimum, which is averaged to about 2% of the balance) for 12 months or sometimes longer. For a list of such credit cards that you can use to get the best of both worlds, you can see our updated list of 0% APR credit cards for purchases.

If like most people, you don't have the new credit card with 0% APR promotion ready at the time of the purchase. You can still plan ahead - know what you really want to buy and get a credit card slightly ahead of time so you will have it in hand when you make the purchase.


Paying For Your Car With Your Credit Card

When buying a car, you can pay for it with a credit card. Unlike buying a home where the interest payments are tax deductible, car payment interests are not!  So sometimes it actually makes sense to use the plastic.

Using your credit cards to pay for your car is fairly simple: some credit card companies offer a promotion called "fixed APR until paid in full." It means that you can request a balance transfer and have the credit card company mail you a check for a certain amount within your credit limit. You can deposit the check into your bank account and use it as you desire to pay off other credit cards, or pay for new purchases, such as your car.

Recent credit cards that offer this promotion include the Citi Platinum Select Card with a 3.9% APR, Discover More Card with a 0.9% APR, and Starwood Preferred Guest Card with a 1.9% APR. It doesn't hurt to give your credit card company a call and see what they can do!

However, this is not the same as the first scenario above because car dealerships don't accept credit card payments for cars, so the 0% APR will be hard to pull off. Even if you pull off the 0% APR balance transfer promotion option and have the bank send you a check for the balance transfer amount, the 0% APR will only be good for the 12 months or sometimes 15 months. The approach described in this scenario is for the life of the loan. For more information on how your credit card can be used to help pay for your car, you can read the article on car financing.
Last Updated on Tuesday, 21 December 2010 05:10