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HELOC Hack : Use 0% Balance Transfer Credit Card?
Posted on 1/8/25 at 8:36 am
Posted on 1/8/25 at 8:36 am
I'm considering doing an addition on my home that will cost $120K. I'm going to pay half cash and finance the other $60K with a HELOC. I can pay this off within two years (hopefully 1) with my commissions , so I won't get eaten up with interest too bad.
It seems I could draw $60K out of the HELOC to pay contractor, then pay off HELOC with a balance transfer 0% credit card. This would give me a 12-18mo window of no interest to knock out most of the loan. Then before the 0% interest window ends on the CC, I would then just pay it off with the HELOC or transfer to another 0% credit card..
Has anyone ever done this? Do you see holes in this strategy? Are there better proven strategies out there to avoid interest ?
It seems I could draw $60K out of the HELOC to pay contractor, then pay off HELOC with a balance transfer 0% credit card. This would give me a 12-18mo window of no interest to knock out most of the loan. Then before the 0% interest window ends on the CC, I would then just pay it off with the HELOC or transfer to another 0% credit card..
Has anyone ever done this? Do you see holes in this strategy? Are there better proven strategies out there to avoid interest ?
3
Posted on 1/8/25 at 8:41 am to BayouBengalRubicon
0% promo rates usually come with at least a 3% balance transfer fee, just FYI.
Posted on 1/8/25 at 8:47 am to slackster
quote:
0% promo rates usually come with at least a 3% balance transfer fee, just FYI.
That would certainly throw out the 0 interest! But it would get me to half - hopefully I could find a car without the transfer fee.
Posted on 1/8/25 at 8:59 am to slackster
quote:
0% promo rates usually come with at least a 3% balance transfer fee, just FYI.
This, it's not really a hack, they are going to get money out of you either way.
Also, can you get a single credit card with a >$60k limit to put that on? Another thing to consider. You might have to open multiple 0% cards to transfer the HELOC balance to. Again, you'll pay 3% at least for each transfer. So $60k @ 3% = $1,800 on top of the $60k.
Also if you can get the 0% card, why would you not just use that as payment and avoid the high interest HELOC altogether? You wouldnt be hit with a 3% balance transfer fee...unless your GC/contractor is going to charge you 3% anyways for the transaction on a c.c.
Posted on 1/8/25 at 9:01 am to BayouBengalRubicon
quote:
hopefully I could find a car without the transfer fee.
This does not exist and I've never seen one. Again your best bet here would be to open a card or multiple 0% cards and pay the contractor(s) with that and hopefully they dont charge you a transaction fee.
You are not going to avoid paying at least 3% for a balance transfer fee to a credit card otherwise.
Posted on 1/8/25 at 10:19 am to thunderbird1100
quote:
This does not exist and I've never seen one. Again your best bet here would be to open a card or multiple 0% cards and pay the contractor(s) with that and hopefully they dont charge you a transaction fee.
You are not going to avoid paying at least 3% for a balance transfer fee to a credit card otherwise.
One other creative way is even if the contractor won't let you pay him directly with a CC, see if you can buy all materials with a 0% interest CC.
Posted on 1/8/25 at 11:02 am to slackster
quote:
0% promo rates usually come with at least a 3% balance transfer fee, just FYI.
As rates have risen this has risen. I have seen 5% now for 18 months so still decent.
Posted on 1/8/25 at 11:17 am to whodatigahbait
This has been an insightful discussion. If I could get the GC to take payment with credit card and use a 0% card that would buy me at least a year of 0% interest, then that would be greatly impactful and keep me from throwing away $4K on year 1 in interest with a HELOC!
Posted on 1/8/25 at 11:22 am to BayouBengalRubicon
Others have nailed it but yes if they will take CC and you can find one with a 0% intro period with a high enough balance that is the way to go.
Just note that you may not know how much credit they will give you until you apply there is a risk of applying for the card and them only giving you $10k or something towards the 0% intro period.
Just note that you may not know how much credit they will give you until you apply there is a risk of applying for the card and them only giving you $10k or something towards the 0% intro period.
Posted on 1/8/25 at 11:22 am to BayouBengalRubicon
quote:
I can pay this off within two years (hopefully 1) with my commissions , so I won't get eaten up with interest too bad.
You’d better hope so, because the CC will hit you with full interest from day one for anything unpaid at the expiration of the promotion.
Posted on 1/8/25 at 11:24 am to BayouBengalRubicon
If the GC isn't set up to take a credit card he's going to hit you for the CC fees.
The only way I see for you to avoid any fees or interest is to pay cash for the job. Otherwise, there's going to be some additional to bear in interest or fees.
The only way I see for you to avoid any fees or interest is to pay cash for the job. Otherwise, there's going to be some additional to bear in interest or fees.
Posted on 1/8/25 at 2:48 pm to VABuckeye
Also consider money is fungible. Using your 0% credit card on other expenses over the year is the same thing as using it on the house renovation costs. No need for balance transfer.
Also, consider the interest accrued on your savings against what the contractor may charge you to use the card. At current rates, you will recoup some of that over 12 months.
Also, consider the interest accrued on your savings against what the contractor may charge you to use the card. At current rates, you will recoup some of that over 12 months.
Posted on 1/8/25 at 3:53 pm to BayouBengalRubicon
quote:
Has anyone ever done this? Do you see holes in this strategy? Are there better proven strategies out there to avoid interest ?
I’ve done something similar and have been doing it going on 2+ years. The only difference is instead of the balance transfer, I just opened the card and started putting everything on it. Pay the minimum on the card and throw monthly cashflow at the HELOC.
I actually just opened my 3rd 0% card and for each card I have had 1-2% cash back on purchases and about a $200 spend bonus per card. It sounds ridiculous and risky but it’s really straightforward honestly. When a card is getting to the end of 0% time, just pay it off with HELOC.
Two things:
1. You need to be disciplined and on top of your finances and ensure that your total debt is decreasing over time. You can’t get stuck playing this game indefinitely.
2. You need to be able to stomach seeing large CC balances.
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