You’ve always heard about how credit cards have such insane interest rates. Then you get an offer in the mail for a card with a 0 percent introductory rate.
You’re tempted. Why not use it? You can make a big purchase, then pay it off slowly. It’s the same as saving the money up, but you get to make the purchase at the beginning, not the end.
This does makes sense, and financial experts note that it can be a good idea, especially in an emergency. For example, maybe your car broke down and you need $3,000 to fix it. You don’t have it on hand and you can’t wait three months while you save it up. Without your car, you can’t work.
Or, perhaps you have other debt on cards that are charging you heavy interest rates. You want to transfer that debt over to the new card to get rid of the interest and buy time to pay.
This can work, but be careful. Watch out for the end of the introductory rate. Some people forget how fast this can sneak up on them, and they charge more than they can ever pay off in time. They get caught up in that 0 percent interest. Then they’re suddenly up against the deadline and they can’t pay, sinking them into far more debt and higher interest rates than they ever expected.
When credit card debt feels like it has spiraled out of control, remember that you do have legal options — possibly including bankruptcy — at your disposal. Make sure you know what they are and how to use them.
Source: The Motley Fool, “When It’s OK to Have Credit Card Debt,” Adam Levy, Sep. 09, 2017