We’re going to tell you an incredible story time that happened in New York. It turns out that a man wanted to play with the banking system… and decided to buy an $11,000 engagement ring using a credit card with 0% interest. His plan looked brilliant and foolproof, proper from a bright mind (but…): he wanted to maintain the balance for two months and, in this way, he will earn interest thanks to the $25,000 he already had in a savings account that gave him a 4% yield. Wait, what?

But what seemed like his best financial move ended up being a lesson about the true nature of financial debt… What happened?

The plan to take advantage of the interest… and the trap

Nick is the New Yorker at the centre of this story. This man explained on The Ramsey Show that he had no intention of charging more purchases to the card. His only motivation was to stretch the no-interest promotion to the maximum and, at the same time, keep earning interest from his savings account.

The problem arose when the financial expert Dave Ramsey analysed the situation: the interest Nick would earn in 60 days would barely cover a lunch… With a 4% annual rate on $10,000, only $400 is generated in a year, less than $40 per month. Ramsey was clear: “You can’t even buy a pizza with that”.

Never trust a bank

Ramsey insisted that the real way to “win” against the banks is never to take advantage of their promotions, but to stay away from debt. Although Nick’s move seemed like a clever use of credit, the truth is that the benefit was minimal compared to the risk of incurring interest if something went wrong.

The numbers don’t lie

The expert was blunt: “You did it sweetly and nicely, but it was a bad move”… For Ramsey, the fact that the savings account balance dropped from $25,000 and reduced the interest rate to less than 1% eliminated any possible advantage.

The risk of trusting banking strategies

First law of life: don’t trust the banks. Although many believe that 0% credit cards are a lifesaver… the truth is that they can become a trap, as in this case. An unexpected emergency or a change in the conditions can make the debt grow exponentially.

In this case, Ramsey demonstrated that it didn’t make sense to incur interest, even if it was temporary, to earn such a low yield. In simple terms: it wasn’t worth it.

Lessons for everyone: the power of quick payment

لآRamsey’s advice was clear and simple: “Write a check today and pay off the card”, because debt, even if it comes with tempting promotions, is always a weight that limits your financial freedom… And today you know you’ll be able to pay it but… you don’t know if tomorrow you’ll have an unexpected expense.

Avoid falling into the same trap

Before using a credit card to finance big purchases… do the math carefully! It’s very important, ask yourself if the benefit you’re seeking is really worth the risk. And remember that the best way to beat the banks is not to use their offers, and to avoid “owing them favours” (debts) at all times.

And it’s true: money always has the last word, unfortunately… Nick’s ring and his mistake with this promotion show that, although many banking strategies seem very tempting… They’re never going to give you anything for free. So, if you have debts with your bank, pay them off as soon as you can! What do you think about this? Do you agree with Ramsey?