0 Interest Credit Cards and your Money

One normally doesn’t associated applying for a new credit card with making money. You might apply for one when you have more money, but not apply for one to get more money.

With 0 interest credit cards, saving money with less interest to pay is nothing new. There is a significant amount of money to be saved on interest paid. But it is also possible to actually make money out of 0 interest credit cards.

Saving with the 0 interest credit card is a form of ‘making’ money. But you already know that. What we are talking about is more than just savings. Using the cash saved from 0 interest credit cards to repay your debts means less interest down the road. The money saved from the interest is also more money saved. But that’s still not good enough. We’re talking about maximising your financial potential and leveraging.

You probably know about the time value of money. Any money left idling at home or in a bank is money losing value. There is an opportunity cost. This money could be working for you elsewhere and growing. In the same sense, your cash saved from paying interest is money that can be elsewhere growing for you. You don’t have to be paying those debts straightaway; money can be invested first, and then used to pay off the balances before the introductory period is over. This is what leveraging is all about. Still not getting a clear picture? Maybe the example below will clear things for you.

Imagine you are thinking of buying a television set that costs $3,000 with your 0 interest credit card that offers the 0 interest for 12 months. Instead of paying off the $3,000, you’re on a free loan from the credit company for a year. You could easily put this $3,000 into a short 1-year bond that gives let’s say, 3% return. At the end of the year, your $3,000 is now $3,090, and you simply pay up all $3,000 to clear your debt so that you don’t incur anymore interest payments. Now you’re $90 richer, and that’s possible because of your 0 interest credit card.

Making money with the 0 interest credit card is clearly possible, but you need to do your maths right. Don’t forget the other costs involved in the 0 balance transfer credit card for your calculation. There are the transfer fees and other card associated fees, and these could possible cost you more than the amount you ‘earn’. More importantly, investing money carries risks. You have to make sure that you are able to pay off your debts before the introductory period is over, even if, in the unfortunate event that your investment fails. If not, you could end up with a lot of debts on your hands that you cannot pay, and interest payments alone could bankrupt you.