Just the other week I made my final, 0% interest payment on the flat screen TV that hangs above the fireplace. It was an 18 month payment plan that I paid off in 14 months. At the time, getting the store credit card and taking advantage of this offer seemed like a really good idea. If you are not careful, however, the 0% interest can jump to their default percentage (20-30%). This is something that many people do not take into consideration. I did, however, consider it carefully and made sure that I had enough funds to cover it before I made my purchase.
Why did I use a store card even though I had the cash to pay for it? I did not want to touch my savings account to pay for it up front. I was able to keep my money making money (even though it wasn’t much) while I sent the payments in every month.
These store cards can be really tricky, for instance, if you are late or miss a payment they can charge you a late fee, all of the deferred interest, and take away the 0% interest on this item for the remainder of the balance! This can leave you up a creek, spending money you didn’t intend to.
To give you an idea of the amount of deferred interest, here are the numbers on my final statement. This is after 14 months of deferred payments:
Initial Purchase: $1,241.16
Deferred Interest Charge @ 26.99%: $237.22
Late Fee: $39.99
Grand Total for Missing Payment: $277.21
Imagine spending an extra $277 on an item because you missed a payment? I know I’d rather spend (or save) $277 elsewhere. This is how credit card companies make their money. Imagine if they gave 0% to everyone and they all paid on time and in full? Credit card companies wouldn’t be in business!
All-in-all, I feel more free not having another bill to pay every month. This monthly payment is now going to my “Gotta Live a Little” fund for weekend trips and vacations. I just felt that having this extra, non-essential bill every month made things a bit more complicated in my life. As of right now, my goal is to simplify things. To me, this means de-cluttering the house, reducing my debt, and spending more time doing things I love to do.
What experiences have you had with credit cards?