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Financing a purchase via 0 interest credit cards
Posted on 1/31/16 at 10:49 am
Posted on 1/31/16 at 10:49 am
What is the downside to financing a medium to large purchase by applying for one CC that has a 15 month intro rate of 0% and then repeating it a second or third time, transferring the balance each time. Assuming you don't have many credit cards and remain diligent on payments. Is this common or even possible? Seems like a good way for a responsible person to get essentially an interest free 3-4 year loan, with transfer fees being the only added cost.
Posted on 1/31/16 at 11:05 am to GRTiger
If 15-month or less term is all you need, why not just delay the purchase for 15-months, save up your $ for your purchase during that time, and then purchase outright...
If your intent is to have it paid off end of that period anyways...
If your intent is to have it paid off end of that period anyways...
Posted on 1/31/16 at 11:08 am to BayouSizzle
We have the cash to do it now, but the idea of interest free financing intrigued me, just to not have that large cash outlay.
And it would be 33-36 months. There is a 21 month one available now and there is always a 12-15 month available.
And it would be 33-36 months. There is a 21 month one available now and there is always a 12-15 month available.
Posted on 1/31/16 at 11:10 am to GRTiger
What are you buying that will take you 36 months to payoff?
Posted on 1/31/16 at 11:14 am to BayouSizzle
quote:
If 15-month or less term is all you need, why not just delay the purchase for 15-months, save up your $ for your purchase during that time, and then purchase outright...
Because he can have it now at no cost.
Posted on 1/31/16 at 11:21 am to BayouSizzle
Do you even time preference, bro?
Posted on 1/31/16 at 11:21 am to GRTiger
I've thought about doing this for some home renovations, specifically a new backporch/patio
Haven't done it yet though.
I have the cash as well. I just hate actually using large sums of savings
Haven't done it yet though.
I have the cash as well. I just hate actually using large sums of savings
This post was edited on 1/31/16 at 11:30 am
Posted on 1/31/16 at 11:32 am to Salmon
quote:
I've thought about doing this for some home renovations, specifically a new backporch/patio
Haven't done it yet though.
I have the cash as well. I just hate actually using large sums of savings
This is exactly our situation. We would put about half down and put the rest on the cc. Or just pay it all if we can't find financing that makes sense.
Right now, the biggest question I have is if the builder will accept a CC payment, and if I'm completely missing something with these 0% cc offers.
Posted on 1/31/16 at 12:01 pm to GRTiger
I'm in a different situation, but similar idea.
I got $8,000 with 21 months interest free on a credit card offer. I've taken that money and used it to prefund my IRA (I usually find the previous year's contribution only). If I time this right, I should be able to about $1500 extra dollars in my Roth account by doing this (funded my lending club account). That's better than any rewards program I have seen.
If you're slipping into the realm of financing wants because credit is cheap, that's a bad move. If you're taking advantage of stupid cheap credit to make more money, it's a good idea.
FTR: I don't intend on ever even paying transfer fees. It takes me about 3 months to put $8k on a credit card, so I can just use the last three months to transition into the next offer or pay it off if I can't find one.
I got $8,000 with 21 months interest free on a credit card offer. I've taken that money and used it to prefund my IRA (I usually find the previous year's contribution only). If I time this right, I should be able to about $1500 extra dollars in my Roth account by doing this (funded my lending club account). That's better than any rewards program I have seen.
If you're slipping into the realm of financing wants because credit is cheap, that's a bad move. If you're taking advantage of stupid cheap credit to make more money, it's a good idea.
FTR: I don't intend on ever even paying transfer fees. It takes me about 3 months to put $8k on a credit card, so I can just use the last three months to transition into the next offer or pay it off if I can't find one.
Posted on 1/31/16 at 12:12 pm to GRTiger
quote:
And it would be 33-36 months. There is a 21 month one available now and there is always a 12-15 month available.
Tell me about this 21 month card
Posted on 1/31/16 at 12:38 pm to 1234567k
The downside is that your utilization will be too high. You will have a high balance reported on your credit every month which will have an adverse effect on your credit score. The best way to maintain and improve your credit score is to pay off your credit card balance in full before statement closing date.
Posted on 1/31/16 at 1:21 pm to AmeriKop45
Is that balance seen differently than a mortgage or car balance? I assume it is, but is it seen more negatively than those?
Posted on 1/31/16 at 1:22 pm to AmeriKop45
quote:
The downside is that your utilization will be too high.
That's only a factor if he plans on buying a house soon. Other than that it wouldn't negativity affect him. Assuming he already has a 700+ score of course.
Posted on 1/31/16 at 1:44 pm to Big Saint
quote:
if he plans on buying a house soon.
No
quote:
he already has a 700+ score of course.
Yes
My utilization rate is usually anywhere from 0-15%, depending on when the report is run, and I've never carried a balance. Don't they aggregate all credit limits and utilization to determine your rate? So if for example I am currently utilizing $5k of $65k, my UR is 7.7%. If I were to get a CC with a $25k limit and put $20k on it, that would bring me up to 25/85, or 29.4%.
Posted on 1/31/16 at 2:03 pm to GRTiger
Wouldn't do balance transfer to another card as there is a charge for that and you are no longer 0%. But I'very done it several times. I've had 4 cards that I only got for the 0% term. Stuck with the last one since I like the rewards. Only one I regret was the Best Buy card because they charged a monthly "security" fee. I immediately paid that one off. Others worked well and have always had great credit scores because of it.
Posted on 1/31/16 at 2:16 pm to KG6
The balance transfer fee would be something to deal with at that point. I know there are cards out now that allow zero fees, but they may not be available when I need them. Some offer the convenience check method, which would avoid the fee, but those usually come with their own fees.
At worst, paying 3% once on what's left of the balance would probably still be worth it. I could make that $250 or whatever it is with the money I retain over paying all cash. Or just pay it off in the 15/18/21 months I have the 0% interest and not transfer at all.
I am not too worried about the credit score aspect. My score is excellent, as mentioned my UR is low, and another account in good standing would probably help.
At worst, paying 3% once on what's left of the balance would probably still be worth it. I could make that $250 or whatever it is with the money I retain over paying all cash. Or just pay it off in the 15/18/21 months I have the 0% interest and not transfer at all.
I am not too worried about the credit score aspect. My score is excellent, as mentioned my UR is low, and another account in good standing would probably help.
Posted on 1/31/16 at 2:58 pm to GRTiger
I don't see why you shouldn't. It sounds like you have a good gameplan and can just pay it off if another 0% offer isn't available at the end of the term.
I just transferred a $8k balance from one 0% card to another. I think there was about a $250 transaction fee. I plan to put at least $8k into my retirement account before the deadline for the 2015 tax year expires. So I'll save over $2,000 in taxes.
Plus I'm on an income based repayment plan where my student loans are forgiven after making 25 years of payments. That payment is based on my taxable income. So the $8k retirement contribution will lower those monthly payments for a year.
I just transferred a $8k balance from one 0% card to another. I think there was about a $250 transaction fee. I plan to put at least $8k into my retirement account before the deadline for the 2015 tax year expires. So I'll save over $2,000 in taxes.
Plus I'm on an income based repayment plan where my student loans are forgiven after making 25 years of payments. That payment is based on my taxable income. So the $8k retirement contribution will lower those monthly payments for a year.
Posted on 1/31/16 at 5:33 pm to GRTiger
You want to maintain your utilization under 8-9%. Ideally between 1-2%. Also only let one of your credit cards report a balance every month around 1-2% utilization.
You're looking a 20-40 point hit on your credit score if you go from 10-11% to repeatedly showing a ~30% utilization.
You said you're not buying a house anytime soon, so may be that could work for you. You need to do the cost/benefit analysis of the worst case scenario - which would be a 30-40 point hit depending on other factors. That said - after you do pay off the card though, your credit score will steadily rise back up. Probably not immediately but 4-8 months.
You're looking a 20-40 point hit on your credit score if you go from 10-11% to repeatedly showing a ~30% utilization.
You said you're not buying a house anytime soon, so may be that could work for you. You need to do the cost/benefit analysis of the worst case scenario - which would be a 30-40 point hit depending on other factors. That said - after you do pay off the card though, your credit score will steadily rise back up. Probably not immediately but 4-8 months.
Posted on 1/31/16 at 5:45 pm to AmeriKop45
quote:
Ideally between 1-2%
So ideal is someone with a $20,000 CC limit only putting $200-400 on it per month? That doesn't seem right at all.
quote:
You're looking a 20-40 point hit on your credit score if you go from 10-11% to repeatedly showing a ~30% utilization.
How did you calculate that?
Posted on 1/31/16 at 5:55 pm to GRTiger
quote:
How did you calculate that?
No way to calculate. Just experience. I can go as far to say that I can guarantee your score will drop at least 20 points if you have a spotless thick file. Otherwise it will be more.
Here is a tool that will help you: LINK /
This post was edited on 1/31/16 at 5:57 pm
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