In 2016, I was desperately in need of a vacation. My freelance career was growing, but I didn’t have the kind of cash flow that would allow me to book the trip I wanted to take.
So I decided to fund my vacation—a week-long music, comedy and tabletop gaming cruise—by applying for the Discover it® Cash Back card. I was accepted within minutes, and as soon as my brand-new credit card arrived in the mail, I used it to book my cruise.
Why did I put a $2,535 cruise booking on a credit card? Because the Discover it Cash Back card comes with 14 months of 0 percent intro APR on purchases and balance transfers (11.99 percent to 22.99 percent variable APR thereafter). If you’re in a situation where you need to make a big purchase but don’t quite have enough cash to cover it, a 0 percent intro APR card can allow you to make your purchase and pay off your balance before it starts to accrue interest.
That’s like having your cake and eating it too—or, in my case, getting myself that much-needed vacation and paying it off in full before the zero-interest promotional rate expired.
Using a 0% intro APR card to fund a large purchase
By putting a large purchase on a card with a 0 percent promotional interest rate, I was able to take advantage of the card’s temporary intro APR period to pay down my balance without paying interest. Booking a cruise on mine turned out to be a good choice for me—but using a credit card to fund a large purchase can be a risky move. If you don’t pay off your big purchase in full before the intro APR period ends, you could find yourself accruing a lot of interest on your unpaid balance in the future.
I also knew that I could make payments each month to work down my balance, but if you miss a credit card payment, for example, your issuer could pull your promotional interest rate and start charging you regular interest right away. Be sure to make at least the minimum credit card payment on time, every time.
Making the most of a card after the intro APR period
How does the Discover it Cash Back card fit into my life now that my vacation—and my zero interest promotional rate—is over?
Right now, I use the Capital One Quicksilver Cash Rewards Credit Card for the majority of my day-to-day spending since I like the simplicity of a flat-rate cash back card that gives me 1.5 percent cash back on every purchase.
But that doesn’t mean the Discover it card never makes it out of my wallet. I use my Discover card for purchases that I make with my partner, and the credit card bill gets paid out of a joint bank account. It’s a good way of designating “yours, mine and ours” spending—and for us, it’s an excellent way of earning 5 percent cash back on bonus categories like restaurants and Amazon.com, since that’s where a lot of the “ours” spending is going these days.
Taking advantage of the Discover it Cash Back’s unique rewards structure
There’s more to the Discover it Cash Back card than 14 months of 0 percent intro APR on purchases and balance transfers—a lot more.
The Discover it Cash Back card has a great cash back rewards structure. Cardholders can earn 5 percent cash back on select spending categories that rotate every quarter (after activation), for up to $1,500 in purchases per quarter, then it’s 1 percent. This works out to $75 in cash back per quarter if you maximize your rotating cash back categories.
Discover’s 5 percent cash back categories include places like grocery stores and gas stations and specific retailers like Walgreens and Amazon. I’m writing this in June 2021, which means I’m about to earn 5 percent cash back on restaurants and PayPal (starting July 1). Since my partner and I are very excited about getting back to some of our favorite restaurants now that we’re both vaccinated against the coronavirus, I think we’re going to be earning a lot of cash back on restaurants.
If you want to know which categories will earn 5 percent cash back in the future, you can use Discover’s cash back calendar to look ahead and plan your shopping. If you totally max out your 5 percent cash back and earn $300 in cash back rewards during your first year, Discover’s Cashback Match program will match it with another $300.
Other 0% intro APR cards to consider
If you’re thinking about using a 0 percent intro APR credit card to book a cruise or make a similarly large purchase, you might want to consider the Citi® Diamond Preferred® Card. The Citi Diamond Preferred Card is currently offering 18 months of 0 percent intro APR on both purchases and balance transfers (13.74 percent to 23.74 percent variable APR thereafter)—making it one of the best zero interest cards on the market. Balance transfers must be completed within 4 months of account opening.
Unfortunately, the Citi Diamond Preferred Card doesn’t offer any rewards on purchases—which means that if you want to use a zero-interest credit card offer to fund a vacation while also earning cash back, points or miles on your trip, you’re going to have to look into some other options.
The Chase Freedom Unlimited® card, for example, offers 0 percent intro APR on purchases for 15 months—as well as 5 percent cash back on travel purchased through Chase Ultimate Rewards, 5 percent cash back on Lyft purchases (through March 2022), 5% cash back on grocery store purchases (not including Target® or Walmart® purchases) on up to $12,000 spent in the first year, 3 percent cash back on dining and drugstores and 1.5 percent cash back on all other purchases.
Plus, the Chase Freedom Unlimited card is currently offering one of the best welcome bonuses available to new cardholders: $200 cash back after spending just $500 in the first three months. Many credit cards require you to spend thousands of dollars before earning your bonus—so take advantage of this offer while you can!
Of course, you could always go with my choice of the Discover it Cash Back card. Five years ago, it allowed me to book and pay off a vacation without paying interest; this summer, it’s going to help me earn 5 percent cash back on restaurants as we all start traveling again.