For people who are responsible with managing money, sometimes it makes sense to pay for large purchases with a 0% APR loan or credit card. The reasoning is fairly simple. If you have a card that is offering an introductory rate of 0% on purchases, and if inflation for the year is running 3% to 4%, then the value of the $100 you’re paying by the time the full amount of debt is paid off is 3% to 4% less than the $100 you were paying at the beginning of the term.
Also, smart purchasers only buy what they can afford. Assuming you have the cash, you can get a significant effective discount by depositing the cash you would normally use to make this large purchase into a high-yield savings or money market account, like the one offered by HSBC Direct, and pay off the credit card directly from this account. This way you can benefit from both the earned interest and inflation.
There are always tight rules when cards offer 0% introductory rates, and the companies would prefer to make money off of you. They will wait for you to fall into one of the many traps, one of which is a late payment. If you miss the payment deadline, the credit card issuer will charge you all accrued interest at the regular, non-introductory rate. In addition to the interest, you’ll have to pay late penalties.
An annual fee would also reduce the benefit of leverage. The cards listed below are all no-fee credit cards.
Be careful. If you have revolving debt, this technique is not for you. Pay off your debt, curb your spending, alter your mindset, then start thinking about using leverage for large purchases. If you’re ready now, feel free to check out these good deals.
Discover Business Miles Card or Discover Business Card.
These are “business” cards, but you do not have to be a business owner to apply and use these cards. Both cards are offering 0% interest on purchases for one year. With the miles card, you can earn “double miles” on gas and travel expenses. The miles can be redeemed for travel credit (any airline, any date) and gift cards.
The non-miles card gives you cash back, to the tune of 5% on office supplies, 2% on gas and up to 1% on all other purchases. There is no yearly limit to rewards, and if you use the rewards for purchases from retailers within Discover’s network, they count double.
American Express Platinum Business FreedomPass Card.
The FreedomPass card offers a 0% interest rate on purchases for one year. Each dollar you spend earns one point. These points are like Discover’s miles; they can be redeemed for travel expenses like flights, hotels, and rental cars, with no restrictions or black-out dates. The card offers a nice bonus, as well. You’ll receive 5,000 bonus points with your first purchase.
The GM Business Card also offers 0% on purchases for 12 months, but it also offers the same interest rate on balance transfers. Don’t get carried away, though. While this card is good for basic leverage, if you’re looking to earn cash back, use this card only if you know you’ll be purchasing a vehicle from the GM family of brands. Every purchase earns 1% cash back except for fuel, restaurants, office supplies, and GM parts and service, which earn 3%. That cash back must be used to purchase the latest Chevrolet, GMC, Pontiac, Buick, Cadillac, Saturn or Hummer vehicles within 5 years.
Chase Platinum Visa Business Card.
The Chase Platinum Visa Business Card, like the GM card, offers 0% interest on both purchases and balance transfers for 12 months. This card doesn’t offer cash back or miles, but by being a customer with the Chase Platinum Visa Business Card, you qualify for discounts of up to 20% at retailers, in addition to special offers on computer equipment and business supplies.
Update: The CitiBank Diamond Preferred Card is also offering 0% APR on purchases for up to 12 months.
While the above cards are technically “business” cards, which explains the discounts and perks on office supples and travel, you do not have to be self-employed or a business owner to apply for and use these cards. The important point is that the card you choose should be used just for one major purchase, after which the card should not be closed but remain unused except for periodic, on-time payments to pay down the balance within a year.
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