A Credit Card can be a great Money Management tool if used appropriately.
It's crazy but typical that when you need credit or loan its never available but when you don't need it its there in abundance. A while back when I really thought my layoff was coming soon, I scoured the web looking for a credit card with a "zero" APR intro period, back then they were scarce and I could barely get approved for much because of my existing debt and low paying job. I was doing it because a "zero" APR credit card can act like a free loan if you do it right. Back then they were only offering a 6 month and some rare 12 month periods. My reasoning, was that if I did get laid off I wanted to delay dipping into my emergency funds as much as possible. Because as anyone who has been unemployed knows, once you lose those funds they don't get replenished.
What you do with one of these cards is you charge and pay the minimum balance on time for your intro period. As long as you do that the Credit Card Companies don't charge you interest for the full balance you carry on it.
As an example, if I got a card today with a "zero" APR intro period of 12 months and got laid off a week from now. If I had the card even if I had some savings, I'd charge first while spending on necessities. Then every month for 11 months, I'd only pay the minimum balance required. Then on the last due date of my intro period, I'd pay off the full balance. The balance I had carried forward prior to that, would have been like a free loan in a sense.
This can get very dangerous if by month 12, you can't pay the balance because at that point the crazy high interest rate will kick in. Which is why I'd focus only only charging necessities that I'd have to buy for survival like food and utilities. But hopefully by then you'd have found a job and have some chance of paying off the balance without carrying the balance with interest too long.
But lets say your just flat broke and unemployed, no financial institution will lend you money at this point. So whats worse? Not having necessities to survive or access to some purchasing power via credit with high interest? Point being from my mind set, having the access to funds for emergency is better than none at all. That being the case, if I sense I'm going to be laid off I go get the card while I still can.
But to avoid that scenario all together, I'd hopefully have enough savings to cover the final balance. Which is why I am a big advocate of having building your savings to have an amount to cover at least 6 months of living expenses. But hopefully, I'll have used that money to make some more money and found a job.
If your not in a potential layoff scenario, a "zero" APR credit card can really be a way to free up some cash for you to invest for higher returns. In the past when banks were paying 5% interest, I'd put my freed up cash into those accounts. Basically make 5% APR on my cash I would of normally used to payoff my credit card balance fully.
In hindset, I am very glad I did open my "zero" APR credit card. It allowed me to build my emergency cash funds quicker even though my paper liabilities grew. As a couponer, it was great because I'd get points for spending and then get cash rebate checks for some of my deals too. My card also had awesome rewards program on top of the "zero" APR. At minimum every purchase earned 1% back in rewards or cash. So in a way it was a double dip scenario, every dollar charged got 1% back and every dollar I didn't pay earned some interest as well from the bank. Simply put with a 1% rewards for purchases and 1% bank interest rate on savings, that would be 2% earned on these funds. Which at current rates is not a million dollars but its still better than the alternative.
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