When we see an interest free credit card is available we may react in one of several ways. We may think that we would never be accepted as we have a poor credit record. We may see it as some free money that we can spend and want to sign up right away. We may see it as a great opportunity to make some extra money. We may see it as a con and think that we should not use it.
Is it a con?
It can be tempting to think that an interest free credit card is a con and should therefore be avoided. This type of credit card is not a scam though as it will allow you to use it just like any other credit card and not charge you interest. However, it is worth knowing that the free interest period is not unlimited. It is normally a few months, perhaps six month or longer if you are lucky. Once this free interest period ends, a variable interest rate starts being charged on the debt in the account. The interest rate on this tends to be higher with a standard card. Some people may consider this to be a con. However, if you are aware of the charge, then you will be able to plan your spending around it. You could take advantage of the card before the charges set in and then pay it off before you have to pay any interest. In this circumstance you could almost say that it was the customer that was taking advantage of them not the other way around.
Is it free money?
Calling something like this free money can lead to trouble. It can make you think that you will be getting something for nothing. You could feel that you can spend all of the credit on the card without any worries. However, it still has to be paid back. It is a free loan, rather than free money. Free money never needs to be repaid but a free loan still has to be repaid.
This means that when you have a card like this, you should always be aware that you will need to repay any money that you spend on it. You need to be thinking all of the time about what you are spending on it and how you will repay it. The interest free period will run out eventually and it can be wise to repay what you have borrowed before you are charged any interest. This means that you need to plan carefully and make sure that you know where you will get the money to pay it off. It could be that you are putting the money aside in a savings account, for example.
Can money be made from it?
It is possible to make money from an interest free credit card. You do need to be careful though as you could end up losing money. With the card you will get a certain period of interest free credit. During this time it is wise to use the card to buy anything that you wish but with caution. If you take it up to the credit limit, then you can make the most money from it, but you need to be careful. For every penny that you spend on the card, you need to put money into a savings account. This needs to be low risk account here you know that you will be able to withdraw the money from without any penalty or time constraints. Try to put it into an account that will earn a decent amount of money. Then just before the interest kicks in on the credit card, you will be able to repay everything that you owe and make a profit out of the credit card.
Do you need a good credit record?
Most lenders will check your credit record before deciding whether to lend you any money and this will be true of a credit card as well. However, there is no credit scoring system, although people are lead to believe that there is. Your credit record just simply shows what debts you have or have in the pats and what commitments you have and bills that you pay regularly as well as your income. This means that any lender will have enough information to decide whether they feel you would be too much of a risk. How they assess this is very personal to them and so it is not always easy to judge whether you will be accepted for a certain loan or not. In some cases it can be obvious, if you have a lot of outstanding debt or CCJ’s or similar. However, if you are not sure, then it could be worth discussing your concerns with the lender to see whether it is worth applying. It is best to do this before applying because if you apply and get turned down, this can work against you as it shows up in your credit record that you have been declined credit.
So whether an interest free credit card is worth taking out, will depend on how you are using it. There are ways that you can use it to your advantage and even make some money out of it. However, if you plan on using it like a normal card and not repaying the balance when the interest starts being charged, you could end up paying more than you would with a conventional card. If this is the case then do some calculations and try to predict when you may repay it so that you can calculate the cost compared to other cards. It may be a hassle but it really is good to do some calculations and consider what you are using it for before you apply. Before applying you should also decide whether you think you will be accepted and if you are not sure check with the company offering the card, as otherwise it could have a negative impact on your credit record.