Step 2: Getting a Truly Interest-Free Loan

A savvy and disciplined consumer can use the credit card companies’ greedy “lure” to their own advantage. The key is to be disciplined and already have the money to pay back the loan before you even apply for the card. In other words, we only recommend using interest free credit cards if you already have money saved to pay off the balance before you borrow the money.

For example, let’s suppose you have $4,000 saved to take a special family trip to Europe to visit relatives. Instead of paying with cash suppose you open up a Master Card with a 12-month promotional interest-free term. Then, you use that card to pay for your vacation including air fare, hotels and meals. Assume that your total balance on the card is approximately $4,000 when you return from your trip two weeks later.

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Step 3: Cashing In!

Now, you have two choices. You could either take the $4,000 you have saved and pay off the card right away or you could take the next 11 months and pay off the card $366 a month. If you’re disciplined about not spending the $4,000 you have saved on something else you can earn 3%-6% interest on that money while paying off your card over the next year. Depending on how much interest you earn–you could end up with $120 to $240 left over after paying off your card. In other words your letting the credit card company finance your vacation for a year interest-free while you collect a year’s worth of interest. Not bad, huh?

But wait…there’s more!

AN ADDED BONUS JUST FOR PLAYING THEIR GAME

These days almost all cards give reward points of some kind…points that can be redeemed for travel rewards, shopping rewards and dining rewards. Even though you’re paying 0% for their money, you’re still entitled to these points. For most cards you can estimate that $1,000 spent is approximately equal to $10 worth of rewards. For example, if you have 5,000 American Express Membership Rewards Points (or $5,000 in charges), you can get a $50 gift card to several stores and restaurants. So, if you play your cards right (pun intended) you can actually add another $50 to $100 to the interest you’ve already made on the loan.

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7 Free Money Rules to Remember

Look…when you’re playing around with money…it’s WAY too easy to fall asleep at the wheel and let stuff get out of control. In fact, that’s EXACTLY what the credit card companies are betting you’ll do. This is a situation where you can’t afford to let that happen. So here are 7 simple, but very important, rules for making this work to your advantage:

ALWAYS KNOW THE TERMS OF THE CARD BEFORE YOU APPLY. How long is the 0% term? How much is the interest if you don’t pay at least the minimum every month? Just one slip up and you will get burned with fees and interest. Know the terms before you apply for the card.

1. ALWAYS PAY YOUR MONTHLY PAYMENT A WEEK BEFORE IT’S DUE. If your payment is late or gets lost in the mail the “0%” terms are revoked and you’ll get hit with back interest and late payment penalties. Thus, we recommend that you always put your payment in the mail at least a week befor it’s due. Or, better yet, pay over the phone or the internet to insure that you pay on time.
2. NEVER BORROW MONEY YOU DON’T ALREADY HAVE OR CAN EASILY GET. In other words make sure you have the money saved or know where you can get it before you put charges on a 0% card. The last thing you want to have happen is not be able to pay it off by the end of the promotional term.
3. REMEMBER IT’S THEIR GAME…PLAY IT THEIR WAY! If you try to do battle with a credit card company you’ll most likely lose. Don’t send them “rubber” checks, miniscule payments or late payments and expect to talk your way out of it. They don’t care about you or your situation. If you can’t play by their rules then don’t play at all. It’s not worth it!!!
4. DON’T GET OVEREXTENDED. It’s tempting to open several of these cards at once and try to get as much free money as possible. That’s not wise unless you’re extremely disciplined. The payments and promotional period expiration dates can be hard to keep track of and you can easily get burned. If you want an interest free loan do it with one or two cards at a time and make sure you can keep track of when your payments are due and when the 0% period ends.
5. CANCEL THE CARD WHEN YOU’RE DONE. There’s really no reason to keep the card open once you’ve paid it off and gotten your free loan. All future purchases will come with interest unless you pay off the balance every month. To avoid the temptation of getting into debt we strongly recommend that you cut up the card and cancel it over the phone. This will insure that no one else uses the card (including yourself) and also get the open credit line off of your credit report.
6. DON’T TAKE THE CASH ADVANCE OFFERED BY YOUR CARD!!! When you get your 0% card you will almost always be offered 0% interest on cash advances as well as purchases. However, READ THE FINE PRINT. There’s always at least a 3% one-time service charge for cash advances. In other words… if you take a cash advance of $1,000 you’ll pay $30 to get that money.

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Free Money in the News

Here are some current news headlines related to “free money”:

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