With more than 20 years experience in the nonprofit credit counseling industry, Kevin Weeks joined the Financial Counseling Association of America (fcaa.org, @TrustFCAA) as its president Dec. 1, 2014. Weeks has extensive knowledge of both the credit counseling industry and the FCAA organization, having served in leadership positions for three of its member agencies and on the FCAA board of directors. In addition, Weeks is working with FCAA members to help develop a long-term solution to the student loan crisis through the website studentloancounselors.org. Weeks holds a bachelor of science degree in business administration, management information systems from Salem State University.
Ask a question.
'Credit Wise' archive
Dear Credit Wise,
Hello, I take a big annual vacation with a friend that costs about $4,000 each, not including airfare. She pays her way, I pay mine. I takes some "chiseling away," but I always pay it all back before the next trip. I used to pay it back using the vacation company's eight-month repayment plan, and put the airfare on my credit card. For the past couple years, I've been putting the whole trip on my regular credit card, and paying the interest. My question is this: Would it be wise to open up a 0-percent interest rate card each year to charge this vacation to and get the rewards, seeing as I would be completely paying it off by the time the promotional period would be over? Or should I just continue to use my existing credit card for this? Thank you! -- Taylor
Dear Taylor,
I am impressed with your planning and ability to pay off your vacation every year. A 0-percent interest card would save you money, since you have been paying interest on your balance every year, whether on your regular card or through the vacation company's repayment plan. Because you do pay it off before your next trip, you are probably not paying a great deal in interest. Nevertheless, paying nothing would be even better if you can get it, especially if you can get a card that offers rewards as well.
As you know, promotional periods are limited, so while the card would certainly work for your first year, the terms will likely be changed by time you are ready to take your next vacation. In a survey of 100 cards, CreditCards.com's November 2015 balance transfer survey found the post-promotional rate to be 17.8 percent.
So, yes, this next year, do get a 0-percent balance transfer card, with the best rewards you can find.
But what you asked is whether this is a plan for "each year."
There, I can only give you a maybe. It may work, but it may not. The key factor will be your credit. If you maintain good credit, and the discipline to pay it off before the promotional period ends, go for it.
Every time you open a new account, your credit reports will reflect that change. I suspect your credit is at least in the "good" category, since you are able to handle this vacation charge year after year. In the credit scoring world, having more credit is good for your score. Just be aware that your reports will show the number of inquiries and new accounts; too many of either can affect your score in a mildly negative way. This could, in turn, affect your ability to get a new card the next time around. If you have excellent credit, it won't matter much, as good, on-time payments outweigh other factors.
But if you have credit that isn't so good, don't do it. You'd enter an endless downward spiral in which you apply for a card, get turned down and take a credit score hit, apply again, take another score hit, and so on.
Whatever you decide to do, I hope you will continue to use your existing credit card as carefully as you have been. I would not suggest you close the account, since older credit is also good for your score. Instead, try to get to the point where you are able to pay your other charges on the card in full each month. This will effectively give you another 0-percent interest card and one whose terms will not expire after a few months. If you pay your card balance in full each month by the due date, you should not incur any interest charges ever. That is a wonderful place to be and I hope you can get to that point.
Be wise with your credit!
See related: Credit card churning crackdown has rewards-chasers worried
Does a personal finance problem have you worried? Monday through Saturday, CreditCards.com's Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers. We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.
The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.
Three most recent Credit Wise stories: Did you like this story? Then sign up for CreditCards.com’s weekly e-newsletter for the latest news, advice, articles and tips. It's FREE. Once a week you will receive the top credit card industry news in your inbox. Sign up now! .
