Remember to Cancel Finished 0% Financing Lines of Credit

This year I had new windows installed (in part to take advantage of the energy tax credit and because the windows were 20 years old) and I took advantage of a 0% financing offer from Castle Windows to fully finance the $7,000 purchase of nine windows and three sliding doors. Six months later, we paid off the $7,000 and smiled as it resulted in a nice 2.5% discount from the interest we earned by putting those funds away in a high yield savings account. Then yesterday, as I was cleaning up some papers, I saw an old statement from GE Money Bank/Project Line, the lender that gave us the 0% financing money. On a whim I tried to log into my account to see if it was active and it was! I had erroneously assumed that the line of credit would be closed after I paid off the loan – aaaaannnnn (that’s a buzzer folks!), wrong!

So, my tip of the day today is to remember to close out those 0% financing offer accounts because there’s no sense having a line of credit open that you’ll never use. The credit score equation calculators will say that having more credit is good because it lowers your utilization and will improve your score, but I argue that having an account that’s “out of sight, out of mind” is dangerous because you won’t keep your eye on it. Let’s say someone gets access to it, since you aren’t checking that account you won’t find out about it until the first bill. That’s bad.

So, if you’ve opened up lines of credit like this, remember to close them out after you’ve used them because they won’t close themselves out automagically.


Should You Take That 0% Financing Offer?

You want to make a big ticket purchase, you’ve just been offered as 12 month same as cash financing offer (a nicer looking term than a 0% interest rate for 12 months), and you’re not sure if you should take it. First things first, good move taking a breather and analyzing the offer, despite how good it looks, because very often things aren’t as simple as they seem and a 0% offer always sounds wonderful right? How good of a deal this is depends on what your plans are for the next 18 months.

Do you plan on buying a home in the next 18 months? If the answer is no, take the offer.

If the answer is yes… here’s some downstream effect math for you.

(Click to continue reading…)


Beware 0% Interest Finance Offers

Just a word of advice for those of you tickled by the thought of owning a television or refrigerator by paying only the minimums on a 0% interest finance deal… see, the one thing that most stores don’t mention is that after the promotional period has ended, the interest that would’ve accrued during the promotional period will be packed onto the loan immediately!

My advice is to read the fine print to find out what the hidden interest rate is while the 0% promotional offer is in effect, sometimes it can be ridiculous. Second, only buy these products if you can pay off the entire thing before the promotional period ends. If you can’t, try to secure some better financing terms before the promotional period ends so you aren’t stuck paying ridiculous rates for a few months.

Finally, remember that it’s a loan so it’ll appear on your credit report and ding your credit score. If you plan on any big purchases, house or car, then you might want to hold off on the new flat screen.

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