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Anyone play the zero percent game

Posted on September 6th, 2006 – 11:37 AM
By Kara McGuire

I recently transferred a high interest student loan balance to a zero percent interest credit card and have just been paying the minimum balance due.

I’ve also been saving an amount each month in an online savings account earning 5 percent interest so I’ll have enough to pay off the entire balance when it comes due next July.

So far so good. I’m wondering if anyone out there regularly uses credit card offers to their advantage. I’ve heard of some people employing 5 or 6 zero percent cards at once for nearly all expenses and savings loads of money in CDs, essentially earning interest off of borrowed money (which is what I’m doing).

I’ve also heard of folks who have strategically selected cash back or points-earning credit cards that they earmark for certain categories of purchases that reap the best rewards. I had a gas rewards card but hit the cash back cap. I often see ads for new cards with new rewards, but it opens up a whole host of issues– like what frequent account openings would do to my score and what to do with my old, unused cards.

In theory, I love the idea of using credit not only for convenience but also to fatten my wallet and get free stuff. But I’m wary of diving completely into this gaming the credit cards game for fear that I’ll miss a payment or won’t follow the 5 point type rules and will get burned.

I’m pretty smart, but the credit card companies are darn smart too.

What do you guys think?

This entry was posted on Wednesday, September 6th, 2006 at 11:37 am and is filed under Main. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

166 Responses to "Anyone play the zero percent game"

Kelly says:

September 6th, 2006 at 12:31 pm

I love the cash back credit cards but many of them are changing their programs to earning points instead of cash. I love my Discover cashback but not everyone takes Discover. I try to use my credit cards for as much as I can and pay off the balance every month. I am currently trying to find a good cashback Visa or MC.

Ruth says:

September 6th, 2006 at 12:42 pm

We currently use a 529 college account credit card. It puts money into our kids college funds at at a 2% rate with no fees. Except when we are doing our cash only spending tune-ups we put most things on our card and pay it off every month. 2% doesn’t seem like that much compared to 4-5% but there is no cap and it doesn’t get spent it goes straight into savings.
In our looking we have found the cash back cards to be not so great in that they have caps or most of the places we would use it only get 1% back anyway. Some of them are limiting on where you can get the 5% back.
I think that each person needs to examine their spending and find a card that best rewards their own trends.
I too am nervous about opening to many cards and reeking havoc on our credit score as well as missing payments. I hate paying interest and fees!

tlange says:

September 6th, 2006 at 11:09 pm

I have done the credit card transfer game once and it has worked to my advantage. I was able to secure a lower interest rate and I am able to pay the debt off faster than I expected. However, you are right about the rules and having to follow them exactly and the biggest one is knowing when the “teaser” rate expires and knowing what the new interest rate will be.

Harlan Blumenthal says:

September 7th, 2006 at 8:08 am

Cash back credit cards are not the same as a 0% no interest card with a limited time frame until expiration.
Cash back or rewards credit cards are fine depending upon whether you pay an annual fee or not!
As for your situation of pushing everything to a 0% and then taking money and putting it in an account at 5%. You must not have much to owe if you are going to pay off the balance next July. Either that or you’re stuffing some serious coin into the account.
More importantly, paying the minimum amount is not a good idea. Creditors keep track of this information and it shows up on your report as paying the minimum balance. Credit card companies always give these folks a spending limit increase because they know the consumer can’t pay more than the minimum payment.
My suggestion is to use your Home Equity Line of Credit to pay off any debt that doesn’t provide a tax benefit.
Sure a HELOC is about 8% interest right now but you will cut that rate down considerably depending upon the amount of NET income (W2) you bring in annually.
Ultimately, having too many credit cards is just as bad as having too few.
Monitor your FICO score annually.

Kara says:

September 7th, 2006 at 10:05 am

Harlan- I know cash back and zero percent cards are different and have different rules. I was just curious to see how you guys benefit from these offers and if anyone’s had bad experiences.

As for the idea of getting a HELOC, I don’t like it. I only pay the minimum on this one card and pay the rest of my cards in full each month. I doubt paying the minimum on one card for a year will significantly lower my credit score.

I am stuffing some serious coin into the account– enough so I will have plenty to pay off the loan by June of next year– the month before the zero percent offer ends. So I’m not concerned there either.

I prefer to think of my HELOC as a last resort emergency savings account. It’s been open for a couple of years at zero, fortunately, and I’d like to keep it that way. I’d much rather use that than a zero percent card for a large emergency, because if times were really tough, there’d be no offer ending and payment spike that I’d have to worry about– unless interest rates went through the roof of course.

So much of this is psychological though, isn’t it? There are obviously wrong answers when it comes to smart money management, but a lot of times deciding what to pay when and how to juggle has to do with personal preference more than right or wrong.

Mike says:

September 7th, 2006 at 5:20 pm

Unless you’re incredibly good at staying on top of these things, I would not advise playing games with credit cards. It’s far too easy to run afoul of the rules and pay dearly for it.

Plus opening up multiple new accounts is going to damage your FICO score.

Amanda says:

September 9th, 2006 at 6:13 pm

I agree with part of what Mike says. You have to stay very on top of these things. I used to play the scheme of transferring around my debt to get no interest, or points, or whatever but all I was doing was moving around the debt and not paying it off. I went from $0 to almost $8,000 in less than two years.

Now I’m banning credit (FICO score be darned) and just trying to pay off the card and live off cash. I did get a tip from a banker though, if you are good at paying off your card you can call for one of those promotional lower interest rates. When that expires, call back for another. As long as you’ve paid on time they will usually give you one!

p.s. Not sure where the budget discussion has gone but last month I celebrated 1 year on a budget. Total debt paid off? Over $10,000.

jerry says:

September 10th, 2006 at 12:54 am

I’ve tried to play the credit card switch games but find it to be not worth the time spent trying to comprehend an ever changing set of credit card rules. I always ended up missing some deadline and paying an annual fee or some interest that I hadn’t intended to. With so much juggling already in life with school, work, a social life, errands, family - why purposely initiate more? Plus, I hate filing all those statements!

Kara says:

September 12th, 2006 at 10:40 am

Just yesterday I received an offer for a USAA American Express card that gives 5 percent cash back on gas, groceries, and dining purchases for six months plus 0 percent balance transfers for a year and freebies such as rental car insurance, medical transportation in foreign countries (yeah, we aren’t jet setting to Iceland every month but it still sounds potentially useful) and free roadside assistance.

When I told my husband I thought it was a good card and maybe we should get it (we don’t have a joint credit card, only a joint checking account) he rightfully observed that “this credit card offer looks like a giant coupon to you.” To him…not so much.

He doesn’t think it’s worth it to open a card just for 6 months worth of 5 percent cash back on those items. He’s also biased towards Visa or Mastercard for some unexplainable reason.

I’ve yet to do the math, but I think we’d end up with a substantial rebate.

Joel says:

September 30th, 2006 at 1:37 am

I’ve never played the “zero percent game” and would advise against it. Use your credit cards like cash; pay off your balance every month.

On the other hand, I’ve been using *cash back* credit cards for years; cash back is the way to go.

I’ve done a fair amount of analysis in the space of maximizing my cash back rewards. An outgrowth of my analysis has been the creation of a cash back calculator tool that anyone can use to optimize their use of cash back credit cards.

I made the tool available for free at
Credit Card Tune-Up: Maximize Your Cash Back Rewards (www.CreditCardTuneUp.com).

It’s very easy to use. Given your spending in various categories (gas, restaurant, utilities, etc.), the tool calculates the expected cash back reward for the leading cash back cards and also for the best 2-card combination, 3-card combination, etc. for your spending profile. Try it at http://www.CreditCardTuneUp.com/ .

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