The Savvy Life

Credit Card # 1:
When to Go With Zero Interest

I have a confession to make. The week before Valentine’s Day, I wrote an entry in Living the Budget Savvy Life where I stated that I don’t buy my wife presents for Valentine’s Day. This year I made an exception. On February 12th, she called me at work and told me that our water heater was spewing water all over the garage. So, this Valentine’s Day she got a new water heater. Now you may not think a water heater is a very romantic gift, but my wife certainly appreciated the ability to take a nice hot bath on the 15th.

Normally, when we have these types of emergencies, we dip into our emergency house cash fund (If you don’t have an emergency fund, go start one with ING Direct today). However, when we went to our local Home Depot, I saw an advertisement for their credit card stating that purchases made with their card for over $300 always gets six months with 0% interest. Usually, I avoid store credit cards. Their interest rates are higher than bank credit cards and I don’t want to carry a bunch of cards I can only use at one place. But six months’ free interest is free money. Reading the terms, I saw that, indeed, the interest rate was 21% - much too high to carry any balance. But as long as I only used the card for purchases over $300, and was conscientious about paying off the balance within six months, it was a good deal. We bought our $500 water heater and went home. Two days later, when our toilet failed (why do these things always happen in bunches?) we paid $130 cash for a new toilet – it was less than the magic $300 threshold.

Credit Card #2:
It Pays to Ask Questions and to Say “No”

About one year ago, one of my credit card companies sent me a letter saying they were going to raise my interest rate to 22%. In very small print, on the third page, there was a little notice saying that I could refuse this change if I wanted to respond in writing. Did you know that many times, you can refuse interest rate changes? Well, of course, I did refuse the increase. The down side was that I could no longer use the credit card, and that if I did incur any more charges the rate would go up to 22%. But, at least I could now pay off the card at a reasonable rate.

One year later, I received a note that a computer subscription was being automatically renewed using that credit card. I contacted the service and cancelled the subscription, but they charged the card anyway. Of course, the bank immediately raised my interest rate. It took about a week of repeated phone calls, but eventually, I convinced the bank that I had not authorized the charge and they refunded the charge and reset my rate. That week of phone calls, negotiating automatic answering machines and repeatedly explaining my case to various account representatives, was incredibly frustrating, but not nearly as frustrating as paying the higher interest would have been.

The Moral(s) of the Story:

1. Read the fine print of your credit card agreements and any changes the company sends you.
2. Be sure to cancel any automatic charges including annual subscriptions on credit cards when you intend to stop using them.
3. Always, always take the time to question changes to your account and to ask for the best deal.