Sometimes unexpected expenses arise, and they're not always small. I've had to make unexpected home repairs and pay for medical expenses recently -- things that aren't necessarily easy to prepare for. I'm also self-employed, so my income varies monthly.
Having an emergency fund to tap into when unplanned expenses arise can help, but even with it a big surprise payment could derail your budget and potentially send you into debt. But I got a little help from a credit card feature I didn't even know I had.
For the last year, my credit card's introductory 0% APR offer for purchases has helped me cover these expenses without sinking into debt. And it wasn't even why I originally applied for the card.
What is an introductory purchase APR?
The credit card industry is both very profitable and highly competitive. And one of the ways that card issuers attract new customers is by offering interest-free, promotional financing on new purchases, balance transfers or both.
Normally, when you make a new purchase, the balance will accrue interest based on the card's annual percentage rate, or APR. However, the interest charges are waived if you pay your entire statement balance in full before the grace period ends on the payment due date.
But when you have a card with an introductory 0% APR, your new purchases or transferred balances (depending on your card's offer) won't accrue interest for a set number of months. By law, these introductory financing periods must last at least six months, and some offers can last as long as 21 months.
Why the Chase Freedom Unlimited's intro APR ended up being the card's best feature
For the first year I had the Chase Freedom Unlimited®, a generous welcome offer let me earn essentially double the cash back it does now.
Normally, the Chase Freedom Unlimited offers 1.5% cash back on all purchases, plus 3% back on dining and at drug stores, and 5% from travel booked through Chase Travel℠. But the welcome offer when I applied let me earn an additional 1.5% cash back on everything I bought the first year (up to $20,000 spent).
This card's standard offer is a pretty good deal by itself, but with essentially double the points, it was a no-brainer. And since the cash back from this card is earned as points that can be combined with the rewards from my Chase Sapphire Reserve®, this was an incredible offer.
It was only after I received the card that I realized it also came with an offer for 0% APR introductory financing on both new purchases and balance transfers for 15 months from account opening (then 19.74% to 28.49% variable).
And while I didn't need a balance transfer offer, the introductory financing for new purchases became incredibly valuable. I would still have to make the minimum payment each month of course, but if I carried a balance, I wouldn't incur any interest charges for 15 months.
Looking for a flexible rewards card? The Chase Freedom Unlimited® offers a good flat-rewards rate and has an introductory purchase APR.
What an introductory purchase APR can do for you
With an introductory purchase APR, you can essentially use your new card as a line of credit at virtually no cost.
When I realized I still had time to use the offer, I moved all my spending to this card to take advantage of both the rewards and the promotional financing. But instead of setting the card's autopay feature to pay off my statement balance in full, I did something that I would never otherwise do: I set it to make the minimum payment each month and started carrying a balance.
I didn't do this without some planning. I made sure I had enough money saved that I could pay off the card's full balance before its introductory APR offer ended. Otherwise, the balance would start to accrue interest at the card's standard rate.
Each week, I would take a look at my current balance and make a payment to free up enough credit to accommodate the next week's purchases.
Doing so allowed me to keep far more money in my checking, savings and investment accounts during the 15 months of the introductory financing period. Not only did this help me earn more interest, but it alleviated the stress of months where my expenditures were larger than I expected.
Warning: Use this strategy with caution
If you're new to credit cards or don't keep to a strict budget, charging up to your card's limit isn't advised, regardless of whether you have an introductory APR offer. Maxing out your credit card can lure you into spending more than you can afford, and it also increases your credit utilization ratio, which could hurt your credit score.
An introductory APR is useful -- but keep these tips in mind
As helpful as these promotional financing offers can be, there are several drawbacks to be aware of.
First, you need to pay off the entire balance before the offer expires to avoid paying the standard interest rate on any unpaid balance. And you shouldn't use these offers as an incentive to overspend and incur debt you can't pay off.
You should also keep in mind that the balance will always be reported to the major consumer credit bureaus. While having a large outstanding balance will reduce your credit score, it should recover when you pay it off.
But if you're applying for a major loan, like a home mortgage or refinance, then you want to have as high of a credit score as possible, and avoid carrying a large balance, even if it's not currently earning interest.
Finally, don't forget to make the minimum payment each month. Failing to do so can trigger a penalty interest rate, which is far worse than the standard rate. Setting up autopay is an easy way to ensure that the payments are made reliably.
Should you apply for a credit card just for its introductory purchase APR?
Even though I didn't consider my Chase Freedom's introductory purchase APR when I applied, it can be a good idea to apply for a card because it has one of these offers. When you can use a card offer like this to smooth out uneven expenses, and earn additional interest income from your savings, then it can potentially be worth it.
The Chase Freedom Unlimited offers competitive rewards, and the introductory financing offer was just gravy for me. But if you think an offer like this could tempt you to overspend or send you into debt, then it's best just to avoid these offers altogether.
How you can find all of your card features
You can find your credit card's features within your summary of benefits document, which you can access by logging into your account online or by calling the number on the back of your credit card. You can also view the card issuer's landing page, which lists the card's current features and benefits. There, you can also find a link to the table with the card's rates and fees, which is required by law.
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