Some 0% APR Credit Cards May Be More Valuable Than Hotel/Air/Miles/Credit Cards

Updated on February 21, 2016


This is a guest post by a friend.

Background: I like my girlfriend but I LOVE signing up for credit cards. In a given year, I would apply for 5-10 credit cards. My current credit score across the 3 bureaus: 790-807, so put to bed whatever myths you have heard or read online about applications putting a dent on your score. But occasionally, I go for 0% APR credit cards to solve liquidity issues.

Current Offers: There are several Citi cards that currently offer 0% APR on purchases for a period of 12-18months, depending on the card you get. With inflation rates at ~3%, Citi is essentially paying you ~3% to hold a balance with them. Unfortunately, Citi charges you 3% upfront for balance transfers, so this is not as lucrative of an option as the 0% on actual spend on the card.

For example, here are a couple good 0% APR credit card offers:

Citi Simplicity & Diamond Preferred – 0% for 18 months. [expired]

My Situation: I am in contract for a condo in Manhattan and need ~$20K in renovations starting in 2 months. The problem is I don’t have $20K, and I won’t have 20k in 2 months… every penny of my life savings went into the down payment and I will be carrying a mortgage of $500k+. I have retirement savings from prior jobs but there are early withdrawal fees as well as tax consequences if I take funds out now. I just started a new job, so I can’t exercise the “borrow against your 401k for a new home purchase” option since I barely have any contributions to borrow against. I have the option to pay for renovations using my credit card, however, I know that my total costs for renovations would miraculously change from $20K to $20.6K – essentially the contractor would take the fee the credit card company charges him and pass it onto me. This is not a bad option since I would end up about even given the ~3% inflation rate. But I don’t like this option; I want to get the best deal possible.

My Plan of Attack: I was approved for the Citi Simplicity card with a credit limit of $20K. My average monthly credit card spend is ~$4k, which I typically put on my SPG Amex Business card. Going forward, I will use my new Citi Simplicity card for charge. After 2 months, my balance will be ~$8K. Instead of paying off the balance, I will keep the money in my bank account, which accrues at a small interest rate. I can then use those funds in my bank account to write a check for $8k for the renovations deposit. So I still need to come up with the remaining $12k once renovations complete in 1 month. Rolling this strategy for another month only gets me another $4k of funds, leaving me with $8k I still need to come up with. At this point, I have a couple of options. I can charge the rest on the Citi Simplicity card and eat the 3% (~$240) that the contractor will likely pass onto me. Or I can use Amazon payments. Without getting into too much into it, see the following posts for great write-ups on exactly how it works:



My Repayment Plan: Keep in mind you need to exercise financial responsibility when carrying a large balance month over month. You need to have a plan of repayment or else you will get hit with the huge APR once the promotional period is over.

At this point, I am carrying $20K every month, paying the minimum amount due at the end of each billing cycle, which is somewhere between $100 – $200. 18 months later puts me in Feb 2015, the date my APR will switch from the super sweet 0% to the standard 12% – 22% range. Normal expenses aside (including mortgage, tax, utilities and typical spend), I expect to be able to save more than $20K in 1.5 years, which translates to a $1,111/month in required savings based on normal pay. Further, bonuses are paid out Feb of each year, so I see this twice (2014 and 2015) before my 18 months are up. However, the prudent financial planner should assume no bonuses to be conservative. If it ends up paying out, great. If it doesn’t, then you remain unaffected since this was not part of your repayment plan.

Worst Case Scenario: Feb 2015 rolls around, and OMG, I didn’t exercise financial responsibility. I didn’t have $1,111/month in savings and against better judgment, I was banking on bonuses being paid out, which didn’t happen. What do I do? Easy – Sign up for another 0% APR credit card and repeat the strategy above. Is it possible that 0% APR credit cards will not exist in 18 months? Yes, possible, but unlikely based on recent history. There will always be 1 bank out there wanting new customers and offering 0% to lure them in. The more likely scenario is Amazon payments ending its generous 0% fee on sending money (for the first $1,000/month). This would slow down the debt transfer process from 1 card to the other, but if you don’t want to get hit with the 12% – 22% APR, consider doing the balance transfer and eating the 3% upfront fee. At this point, you are in a bad spot and $600 is a small fee to pay for rolling your debt another 1.5 years.

Final Words: Any given day, I would apply for a credit card with a 50K+ sign up bonus over a 0% APR credit card. However, I need money, and I need it fast with no cost to borrow. Like I said, you need to exercise financial responsibility if you do this strategy.


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  1. Strategy makes sense and this may be negligible, but don’t forget to factor in opportunity cost. You’re giving up 1-2% you could have potentially earned from the SPG rewards.

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