0% Credit card offers

For the last couple of year I been using CC 0% offers to purchase something big and then pay off the minimum till the offer followed by one time paying off CC debt at the end of the offer. (like last time I bought tickets for international travel which I was anyways planning) I use the money saved and put it in money market to earn 5%. Once the offer is complete I cancel the card and apply for a new 0% offer.

I know I have to be extremely careful with late payments and all and usually I make automatic minimum payments every month to avoid late fees etc.

Other than usual pitfalls of this strategy does it in anyway affect my Credit Score? I mean the frequent cancelling and applying for new cards bad for my score?

Thanks for any responses...

Reply to
learnfpga
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IMHO, they are silly pitfalls to put yourself in danger of running into for very very meager returns on the risk.

Sure. Part of your FICO score is the impact of recent searches for/applications for credit. Plus, if you're borrowing needlessly, your amount of debt (as a ratio of current debt compared to available credit limits) is higher than it need to be. These both can have negative impact on your score.

Is that much hassle really worth it for a few months of free use of a few thousand dollars? I can't imagine your net savings/win on this is more than some $50-$100. I don't know about you but my time and my not having to care about when the 0% runs out is worth a hell of a lot more than that little bit of money.

Reply to
BreadWithSpam

This is exactly what people overlook most often. Hypothetically, if it takes 30 minutes a month to keep up with you will waste 6 hours a year. If you could have spent those 6 hours at some other employ making $100 an hour, you will need to have gleaned $600 from your CC manipulation just to overcome the opportunity cost of your time.

Of course the variables above are widely adjustable, but I suspect that if most people evaluated the true cost of this "plan" they would find it unprofitable. I'd actually rather sit on the couch with my family for those 6 hours than save the $50 - $100 bucks. But that's just me!

Reply to
kastnna

I think I gave a wrong impression. I am not necessarily trying to make money here. What I was trying to ask was if someone was anyways planning to make a big purchase and intead of waiting to have enough money for that (or disrupting monthly budget) did that on 0% APR and instead paid it off within the offer period then does it affect the credit score as one is appying to a new CC etc.

I got the answer though. It seems it makes a difference in the score and is too much of a pain for the amount of benefit received.

Thanks all

Reply to
learnfpga

This Jan. 31st I purchase an $11 000 car. I took $5000 out of the bank and I used a credit card cheque that granted me 1.97% on a cash advance for $8000 (balance of car purchase plus 12 months car insurance). That rate is good until July 15th and which date the oustanding cash advance cheque will be subject to 19.97%. Paying insurance by the month is a 3% high cost on your premium so I always pay auto insurance yearly.

Now I have only paid $3000 of the $8000 cash advance back on the card. Once July 15th rolls around I will have about $4000 maybe less owing on that cash advance that will be charged at normal rate, at which I will switch it to a 7.75% credit line (revolving) and pay off in 4 months.

I don't cancel credit cards or apply for them based on teaser rates, however I keep my eyes open for teaser rates specials on current credit cards and time big ticket purchases and borrowing when those offers come thru but constructing a tightly controlled repayment schedule before I think about the purchase itself.

Car loans in Ontario for used cars are about 6% for really good people and

7.75% for normal people.
Reply to
The Henchman

I don't think "most people" can very easily employ themselves at $100 an hour. Oh, plenty of people may bill that much, but after taxes, expenses and risk, etc. do they end up with that much?

If you borrow 10k from one of these and invest it for a year in a money market, that's worth about $500. I don't find it takes 30 minutes a month to worry about. More like 10.

And 10k is not hard to get. My dad actually has had about 50k cycling around in on three or four different zero% offers that keep rolling for about 2-3 years while his money sits in the bank. He's making about $200 for an hour's work each month.

I suppose if I ran a hedge fund or was a big-time CEO, that kind of money would be meaningless and not worth the time, but as a regular middle class small-business owner, I don't find that opportunities to make $200 an hour for clerical work grow on trees.

Michael

Reply to
Michael Sullivan

I can't speak for the other poster, but I think the cost is a lot more than just the 10-30 min./mo. The other big parts of the cost of that "free" money are (a) potential hit to your credit score (for opening and closing accounts, for having more outstanding consumer debt, etc) and much more important (b) the risk of screwing up. One late payment, one missed payment, not paying it off fully before the interest rate jacks up - sure, if you do it perfectly every time, those are non-issues. But one screwup and not only do you wipe out most of that "free" money savings, but you also, again, whack your credit score. And the whole time you're walking that tightrope, you're carrying around entirely unnecessary stress.

I've no idea who amongst us makes $100/hr or whatever, but I can say that it's worth a few hundred bucks a year to me to never have to think about this crap. YMMV, but I have other things to think and worry about and don't need these potential couple of hundred bucks that badly. Frankly, most folks would make that couple of hundred bucks a year - and then some - by just investing in funds with lower expense ratios. Much less effort and vastly less risk than the zero% game.

A big part of financial planning isn't the "most bang for the buck" but, in fact, the least stress for the buck.

These was an ad campaign by an investment group a couple of years ago all about how they'd take care of your money because you had other things to think about. And while I don't agree that one shouldn't think about one's investments and financial plan, I do think that most of us - especially those who don't actually work in the business - have other things to think about most of the time and smart planning includes minimizing one's need to actively manage investments and debt.

Reply to
BreadWithSpam

Michael, you are right, median income is closer to $20/hr. kastnna's point is still well taken. Most of these offers are for much lower lines, $2000-$5000. For the $100 one might make in a year off the $2000 line, each person needs to decide if it's worth the time, potential impact to credit rating, and risk of missing a payment on yet another line. With online banking, it's easy to avoid much of that, by setting up the monthly minimum payment in advance, along with the final payment. I've never seen an offer that gave that high a line ($50k?) but it would be compelling for many. JOE

Reply to
joetaxpayer

joetaxpayer wrote on [Fri, 15 Jun 2007 09:46:55 -0500]:

You need to look in the right places. People do this with 100K+ all the time.

Reply to
Justin

Perhaps, but the opportunity costs only make up one component of the overall costs. "Bread" did a great job of summing it up. There are numerous costs and risks associated with you anticipated return. Furthermore, I'm willing to concede the 5% MM rate of return, but it isn't without taxation. You're likely only going to walk away with 4% or less. In addition, the costs may be small or difficult to distinguish, but your plan still has them.

One could also make a decent argument that the amount of credit available to implement such a plan and average income are directly proportionate. Higher incomes USUALLY correlate to higher credit lines and better offers (such as 0%). If someone earning minimum wage could get a $50K credit line, then it might be worth their time (their time is cheap therefore their opportunity costs are low). Chances are they can't. Higher credit lines correlate to higher incomes (i.e. >$20hr).

If the average is $20/hr (JOE hasn't ever steered me wrong), then maybe the opportunity costs alone are not enough to overcome the interest earnings. Without evaluating the specifics of each scenario its impossible to tell. The whole point that many of us were trying to make was its important to incorporate ALL of the costs of such an endevour. Some of the costs, like time, may not be as simple as a straight forward dollar symbol.

I probably choose my diction poorly by using the word "employ". Do not simply limit your scope to what you earn an hour at a job. For instance, even if I could make $100 following this plan, I would gladly trade it for a hour of free time to golf. Therefore its not worth it to me. Maybe it is to you. For $300/hr maybe it is to me too:-)

Reply to
kastnna

Cite sources? How often is all the time?

Is there a group or an investment company that is widely using this method? If "people are doing this with 100K+ all the time" I would think that CC companies would consider it a threat to their bottom line and curb the practice. I also think we wouldn't be discussing it here, but rather enaging in the practice ourselves.

No offense, but "people do it all the time" is often a baseless statement without support.

Reply to
kastnna

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all the time.

Group of individuals

It takes time and patience to build the credit lines.

Reply to
Justin

Could you be more specific. That just looks like a "hot deals" site to me. Some of the deals might be pretty good, but I seem to be missing where it tells us about all those folks getting 0% rates on cash.

Plenty of cash back when you buy stuff, but that's not the same thing.

Now, I'm quite certain that there are plenty of

0% financing deals out there - most for buying stuff now, but a few which simply let you get cash out.

Nothing, as far as I've seen, that's much of a rational use of time, energy or *risk*.

Yeah. You have to work long and hard for that "free" money! Heh.

Reply to
BreadWithSpam

Sure.

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Checkout sites like cardoffers.com

You have to work somewhat, once. It's not long and it's not hard.

Reply to
Justin

The risks aren't all that large if you have the money to pay it off. You screw up and that means you end up paying a late charge and a month's usurious interest rate. The ones I've seen don't require a minimum payment or let you set it up automatically -- the only way to screw up the plan is to accidentally charge something to the card. So I keep it in a drawer until I'm finished using it as a free margin loan. So there's risk, but it's a very small risk.

That's true. But someone earning $20/hr is earning a *lot* more than minimum wage, and probably can get a few thousand in this kind of credit if they aren't overstretched on house/cars. My dad doesn't make anywhere near $100/hr and it was no problem for him to amass 50k of free credit.

That's obviously your decision. Me, I figure I can work 2-3 hours less[*] if I spend one of them doing this.

Michael

[*] obviously for some jobs, those hours in the form of a lump sum down the road when you retire N months earlier than otherwise. Depending on your personal discount rate, that may queer the deal.
Reply to
Michael Sullivan

The 50k that my dad is running is on three separate cards.

You probably can't get that kind of total line unless your mortgage and other long term liability is well under what the banks think you can afford. But if you can, you're the sort who pays bills regularly and efficiently and you don't mind the minor hassle, it seems well worth it to me.

Michael

Reply to
Michael Sullivan

I don't think so. I used to do the same thing when I had a mindless job and could devote the brain energy to keeping up with it. My credit rating was up to 810 by the time I was ready to buy my last house. (The second highest the loan officer had ever seen.)

I stopped doing it when I got a more mentally demanding job though. Now most cards charge you back interest if you mess up. One mistake can cost you more than several years worth of savings.

Reply to
Daniel T.

I've done this successfully, but I do so only when the vendor supports automatic minimum payments drafted from my checking account, and when the cash advance fee, if any, is well below what I'd make in interest.

Reply to
Chris Cowles

My experience is similar.

Reply to
Chris Cowles

I've not seen that detail in the offers, but I've not bothered with this lately. Like you, I have too much other stuff on my mind to bother trying to keep up with it.

Reply to
Chris Cowles

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