Are 0 Interest Credit Cards Really For You?
I personally don’t own a credit card. I plan never to do so because my parents told me about how the interest can kill you. They always warned me to pay in cash and only use any type of plastic when it’s absolutely, life-or-death necessary to do so. I guess they had what one would call a “really bad experience” when it came to this that left them one string short of being traumatized when it comes to credit cards. My mother keeps repeating that “interest can kill you”, and of course she meant that figuratively. The lowest interest rate I’ve heard of, if I remember correctly, is 2.5% from this call center vendor on the phone. I passed that call to my dad and he promptly pushed the off button on that wireless handset. He assured me that Americans do that all the time and the call center agent will be fine.
Ever since then, I never even considered getting a credit card. Aside from interest, I also learned the term “hidden charges” that print the additional charges in very tiny fine print in a supposed “no extra charge” offer. I also learned about “penalty fees” from banks that charge you insane amounts of money for being late for a payment. Cards have both of these, and being a major cost-cutter, I kept away from owning any type of rectangle piece of plastic that to me, had “debt” written all over it.
When I learned about 0 interest credit cards, alarms in my mind went off and I was very skeptical. There is, of course, no such thing. I was taught that the bank makes its money from interests, hidden charges and penalty fees. So this either had to be a scam or a very well thought of ploy to entice those scared to death by interest, like myself, to avail of a card. A little research already affirmed my suspicion; if the bank didn’t charge you interest up front, it will with the products you buy with it.
Assuming you availed of this certain 0 interest credit card, and you buy a fridge with it. As you pay by card, this means you pay in installments, and they charge you monthly for that fridge. The bank doesn’t charge you interest since you got 0 interest credit cards, but taking a closer look at how much you’re paying for with that 0 interest credit card and adding up how much money you’ll lose by the end of this transaction, you actually pay more. Why is that? The product itself has interests to pay for, and some if not all of it goes to the bank. If you pay in cash, however, you stick with the original price of the product, without any extra. So if you pay by card, that 12,000 fridge will then be about 14,000 or 15,000 in the long run. Just add up how much they charge per month and you’ll find that paying in cash is indeed a better deal than paying with a card.
Credit cards are for the absolutely necessary items that you need. If your fridge is absolutely whacked and you don’t have enough cash on you to buy that fridge in cash and not paying with your 0 interest credit cards for it will mean that you have to live without a fridge for a couple of months, by all means do use your credit card. But given the option, and if you do have the means, it’s advisable that you pay in cash rather than with your card. Even if it does indicate that it is a 0 interest credit card, and by now you know that it has hidden charges that go up the roof, living with a fridge for that long is just bordering on insane.