Credit cards can improve your life and finances in a few crucial ways, despite the bad rap they often get. Yes, it’s true that it can be easy to let your spending get out of hand if you have access to a credit card, and the interest rates they charge are often ruinous and can cause an unpaid balance to spiral upward.
But using credit cards responsibly can help you earn cash back, rewards points, or airline miles, which you can translate into lower cost travel, cash to invest, or even just lower credit card bills every month if you redeem cash as a statement credit.
There’s one type of credit card in particular that’s worth considering for a brand-new homeowner. I’m about to become one myself, and I’m already planning to apply for one of these cards after my mortgage has closed (this is extremely important — more on why below). Here’s why new homeowners should look at opening a 0% APR credit card.
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A 0% APR intro offer can come in handy
The go-to interest rate on any given credit card is overwhelmingly likely to be quite high — like, 20% or higher. According to the Federal Reserve Bank of St. Louis, the average rate on credit cards assessed interest in February 2024 was a whopping 22.63%. But there are some great credit cards that come with a period of 0% APR when you first open the account. This could be anywhere from six months to as long as 21 months.
This means you won’t be charged any interest on purchases made on these cards until after the 0% APR period is over. Let’s say that you move into your house, and the refrigerator decides that it no longer wants to keep your food cold. Now you’ve got to replace it, and you might not have the cash at the ready.
With a 0% APR credit card, you can charge the cost of your new fridge and pay down your balance gradually. If your new fridge costs $1,000, and you’ve got a 15-month period with 0% interest, that means you can pay $67 a month and have it paid off before you’re charged interest. Plus, if the card rewards you with cash back, perhaps at a rate of 2%, you’ll earn $20 back on the fridge!
Remember, buying a home means taking on all kinds of unplanned expenses, and having more time to pay them off without accruing interest can be a big help.
You need to make those payments on time
Note that 0% APR doesn’t mean you can skip making payments, though. If you charge purchases to any credit card, you’ll still have to pay at least the minimum amount due every month. I’d urge you to do your own math, though, and ensure you’re paying enough every month to ensure you’ll actually have the purchases paid off before the 0% APR period ends.
If you’re late with a payment, you could find that the card issuer rescinds the intro APR, sticking you with the go-to rate — or even a penalty APR. To avoid this, make sure you’re making all payments on time.
Wait until AFTER your mortgage closes!
Here’s the other major caveat about opening a new card as a new homeowner. Do not apply for a new credit card while you’re waiting on your home loan to close. At this time, it’s absolutely crucial to leave your finances alone.
Your mortgage loan will be in underwriting, and your lender will check your credit during this time. If it sees that you’ve opened a new credit card (or made large purchases on an existing one), it could throw off your financial eligibility for the home loan by changing your debt-to-income ratio or credit score. Don’t risk it — you’ve waited too long for this. Just cool your jets, and once you’ve spent a few hours at the closing table, signing your life away, then you can apply.
A credit card with a generous 0% APR offer can make your financial life a bit easier as you’re adjusting to being a homeowner. And you’ve got enough to worry about with your new house, so wouldn’t it be nice to know you can cover a surprise expense and have plenty of time to pay it off without it costing you extra?
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