Using Credit Card Money can be a great thing for your business start up, or that big renovation, or it can be your worst nightmare!
Many companies, will offer very low interest rates or even zero interest rates, for cash advances, or other credit transfers. If you play this game right and follow the rules, this can work well for you, but if you do this wrong, then it can cost you a bundle.
The trick here, is to schedule some time to really watch your finances. I know this may seem boring, but these companies are making these offers with the hopes that you will be too busy to notice when the free ride is up, and not notice those fat interest charges now being added.
HIgh interest rates is the way they make their money. Lend you some money for free for a set period of time, and then hit you with huge interest rates when you don't pay it back by the end of the time limit, some even go retroactive to when you first borrowed the money.
Example: Say your credit card is offering you $5000.00 cash advance on this card for zero interest. The first thing you have to look at, is if you already have a balance on this card that you don't pay off each month, if you do, then throw that offer in the garbage. If you take it, all your payments will be applied to the $5000.00 zero interest, and leave the original balance lingering in the much higher interest charges and not being paid down. The fine print will tell you that your payments will go towards the cash advances first.
If you have no balance on this card, and you could use the $5000.00 dollars for your business startup, then this money could work for you. If they are offering a zero percent for one year, then you need to mark the end of this term on your calendar, because they won't make a point of reminding you!
This means you should work out what it is going to cost per month for a year to pay this money back. On $5000.00 it will be approx. $416.66 per month. If you can afford to pay that per month, with the balance paid up within the stated year, then you will, in effect, have used their money for free!
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How to Use Credit Cards to Your Advantage
But do yourself a favor, and do NOT use this card for any other purchases while you are making monthly payments. If you now go to the office supply store and purchase $200.00 dollars worth of supplies on this card, you may think that all you have to do is add $200.00 to your next $416.66 payment. NOT.. This is where they will get you. Your payments will always go towards the cash advance balance first, leaving purchases at a totally different and usually much higher interest rate. The deal is ONLY for the cash advance. Keep that in mind.
You should keep this card separate and don't use it. Leave it at home until the cash advance is paid off.
If you want to use this system to your advantage, then you should have two credit cards. One for your day to day purchases, and the other one for the special cash advances, or credit card money. This way, you will win at this game.
If you watch these rules carefully, you will come out ahead, will have used their money for free, and not paid them any or very low interest (depending on the deal they offered). But if you take the money, and don't set aside any during that one year period, and you miss that last month to pay it off at the low or zero rate, then the interest will kick in, and some credit card companies will date it back to the first day you took the money, which would be a years worth of interest. That will hurt!
So, even with our busy lives, if you decided to take advantage of these deals on credit card money, they you had better keep careful track, it will be well worth the investment of time.