When you think of borrowing money, the first thing that is likely to come to mind is interest rates. It is true that all types of credit, from credit cards and personal loans to mortgages and bank overdrafts, have interest rates attached to them. However, not all of these interest rates have to apply to you and your borrowing, and you can effectively borrow for free if you know how to use credit wisely.
The best way to borrow money without paying any interest is using a credit card. When looking for cards, by all means compare credit card interest rates and find the lowest APR you can. However, as long as you pay off your bill in full every month, these interest rates needn’t affect you at all. You will only pay interest on your credit card spending if you pay just the minimum required repayment on your credit card bill each month. The amount you don’t clear off will be carried over to the next month, with the addition of a hefty amount of interest (depending on the interest rate of your particular credit card). So, in a nutshell, here are the exact steps you need to take to borrow for free using a credit card:
- Apply for a credit card with a reasonable interest rate and a good credit limit
- Spend on the card as normal
- Pay your bill in full every month
If you follow this pattern month after month, and don’t break any of the other terms and conditions, you will never have to pay any interest on your credit card spending.
Credit card stoozing
Once you’ve mastered using your credit card without accruing interest, you might want to try something called credit card stoozing to make your money go even further. Stoozing involves borrowing on a credit card with an interest-free period and stashing the money spent in a high interest savings account. As long as you pay off the balance in full before the 0% interest period ends, you will actually be up on the deal. You’ll have paid no interest on your credit card spending, whilst at the same time interest will be growing in your savings account. However, you should only try this stoozing method if you are very organised and good with money. If you don’t know what you’re doing or you often forget to pay your bills on time, stoozing will not work for you.