Some companies offer zero-interest, same as cash financing for new users of their credit cards. This service is most popular in major retailers and specialty stores with their own unique credit cards. While zero interest may sound appealing, let's see why you should be sure to pay off the balance before the zero interest period ends.
Retroactive interest
Any "same as cash" financing period comes with a major catch: retroactive interest. When you use your credit card to buy a product, your interest free period exists only for as long as the limit, usually 12 months. When this period ends, the interest that you would have accrued during that 12 month period is added to the balance if the balance has not paid off.
The result? People who do not pay off their same as cash balances before the zero interest period ends pay all the interest they would have paid. This means that the zero interest period essentially has no value – interest is paid because the balance is greater than zero.
Always be sure that you can afford to pay off a balance in full during any zero interest grace period. If you cannot, you might have a big expense coming down the pipeline – hundreds of dollars in interest on money that was supposed to be free.
Avoid this charge!
The best way to avoid this common catch is to read the fine print. Look for an asterisk that leads to a disclaimer about when your balance has to be paid off, and which interest charges you will have to pay if the balance is not paid in full.