Would You Do This? (credit card ques)

[Jennifer L.]

I have to spend a large amount of money to do some work here on the farm. In preparation for this I've closed an account I had, intending to use the money for the work.

This morning I finally got sick of wondering what rat hole I threw one of my credit cards down---it's lost here in the house, it has no balance on it and I haven't used it for the last year at least. (It's with LLBean that I used to buy a lot from once upon a time, and you can get free shipping if you use it with them, so I've kept it "just in case" I order from them sometime. Anyway, that's the history of the card.) What brought my attention to it was an envelope in the mail from the credit card company. I saw it, remembered I had to replace the card and opened it for the phone number to call. Didn't even look at the promotional literature, but of course that's the number I called--figured they'd shuttle me around to whoever is in charge of card replacement and that would be that.

The woman who took my call was happy to replace the card, but she immediately went after me to use their promotion of 0% APR for 6 months on purchases. It just so happens that the credit limit on the card is just about exactly the same amount of money I need for the farm. I told her I always pay my credit cards off monthly, and that if I used something like this, at the end of the 6 months I'd pay it off and the card company would have made nothing. I even went so far as to say I'd feel guilty if I did it. Her answer was "people do it" and she said that twice. She would have been ready to put the money in my checking account for the purchase right that minute if I'd said yes. So I told her I'd think about it.

Now, I've taken the money out of my account already, but that could easily go back into a 6 months CD. I'd earn decent money doing it, and the credit card company would be financing me for six months and earn nothing.

It's a temptation to do this, and I can't see anything really bad from doing it. Has anyone else ever done this? Is there something going on here I don't see?

Jennifer

[jessepona]

I don't know... credit cards scare me. Still, if you were sure to pay it off right away maybe it would work to your advantage. I think they get people that think they will pay it off and then don't due to poor money management or personal crisis and then they're stuck paying off the balance and interest for thirty years. These cases must be the majority otherwise they wouldn't make money and they wouldn't do it lol

[rambler]

The credit card company depends on the fact that people:

Forget.
Keep spending & can't pay it off at the 6th month mark.
Don't read the fine print, and mess up & bingo are on the hook for the interest.
Charge more things to the credit card over the 6 moth period - and in the fine print, you will need to pay off _everything_ as they apply any payments to most recient charges, not paying off the 'free interest advance. You don't even know, and in the next bill you end up owing 7 months worth of back-interest on the 'free advance' you thought you paid off but money wasn't applied to it....
Many advances have a charge to them that is not called interest - be _sure_ yours does not have on of these. It can amount to quite a bit.

From all of this, they tend to make money off of _most_ people who take the 'free' advances.

If you can play the game & stay on top of all the rules, good for you. Nothing wrong with that.

For _most_ people, they tend to miss something along the way....

--->Paul

[mightybooboo]

All the warnings from Paul,and I'll add.......

You lose your job,get hurt,or,or ,or....And they up your rate to 28%.
That cd money,it goes to bills to feed the family,taxes,keep the heat on,and meanwhile they got you in an interest trap.

This is only one step above buying stocks with a zero credit card.

Keep OUT of debt.

Try getting cutesy and you may just get punched in the face.Dont do it.

Simple risk/benefit equation.That sounds like considerable risk for low benefit.

BooBoo

[mightybooboo]

Or this,you miss ANY bill,they revoke your 0% and hit you with the max allowed by state law.They change the address where to make the payment,you send to wrong address,gets delayed in mail,up goes the rate,you were late.Thats a popular game,and its very legal.Providian was FAMOUS for that stunt.

They have plenty dirty tricks to revoke the terms agreed upon.

They are leaches.

Think about it,you are looking for a way to take advantage of THEM,trust me,they are far more skilled with traps to take ADVANTAGE of YOU.
Works both ways you better believe it.

BooBoo

[turtlehead]

Can you use the LLBean credit card for purchases NOT with LLBean?

If not, I see absolutely no point in getting it.

If yes, I still think it's better to pay cash for the farm improvements and pass on the credit card, but that's your call.

[gccrook]

I do it all the time. Why put out my hard earned money that is earning interest, when 'they' want to lend me theirs for free. I have one right now that I put some of the building expenses on (we are adding on to our house), for a year. My money will earn interest for a year, and then pay it off. As for getting laid off or sick etc, no difference if I had already spent that money or kept it to pay the credit card. Either way, I am in deep doo doo if I do not have any extra set back for that rainy day.

[boxwoods]

Make sure you read the fine print. Most companies charge an extra 3% finance charge to give you that cash. I would be surprised if it's not there. Or ask the questions of the company before you take it.

[bare]

Shoot, I do it all the time too. I ain't too concerned about the credit card company not earning any money, heck they charge the merchants about 3% right off the top!

Don't forget though, that during those six months you still have to make payments and as has been mentioned, ON TIME! I pay mine on line and am careful to write down the confirmation numbers as proof that I made the payment on time. Also, as others have pointed out, don't continue to use the card until it's paid off completely.

I'd probably even call back LL Bean and tell them you considered their offer, but it just isn't long enough at 0% and ask for 18 months at 0%. Works for me frequently.

The only drawback with all these 0% offers is you could end up with so dang many credit cards and phenomenal amounts of credit line. I'm amazed how much revolving credit I've built up over the years and yet no one seems to care...my credit scores just keep going higher and higher.

[arabian knight]

Originally Posted by mightybooboo

max allowed by state law. BooBoo

Not very many people know this is that there is NO LIMIT to what a credit Card Company can Charge for INTEREST. No Limit what so ever~!~!!
I heard this the other night on The Clark Howard talk show.........
There is no State LAW,,NO Federal LAW governing this at all.......

The gold rush is on!

Delaware was next to opt-in, revising its laws within the year.

By the early 1980’s, Utah, was sporting a new American Express headquarters, Hew Hampshire became home to Providian, Virginia rolled out the red carpet for Capital One and Arizona found new residents, Bank of America’s card division, and Direct Merchant’s bank.
Arizona, in a short fit of conscience, limited it’s rates to 36%, the other states had adopted “no ceiling” limits
Within a very short time the creditors had turned a big problem into even bigger profits, profits which more than tripled again with the advent of “default rate” pricing.
The consumers responded to the “repriced” cards by applying for them in record numbers.
Last year saw $1.5 trillion in credit card charges at an average rate of 14%for the card issuers, lemons have never tasted better.

http://www.creditboards.com/mambo/in...id=14&Itemid=2

[mightybooboo]

Good link AK,even more reason why I allow only online purchases on my cards,and pay them electronically the instant Im done shopping online.

they are blood sucking leeches,and never ever forget that.

BooBoo

[Jennifer L.]

All very interesting, thanks. I'll have to study up on this! In my family we were raised to not use debt. When I got to college and took an economic course, I was surprised to find out that people actually thought debt was ok, and that it could be used as a tool. I still have an inbred distrust of it, though.

Jennifer

[Fire-Man]

I haven't used a Bank for a Loan in years----I Always use my credit card(s). I get the interest usually lower than the Banks will give me. Right now I got one offer for 2.9% fixed(for the life of the loan). In the last few years, I have bought a $16,000 used truck, a $11,000 Sawmill, A $8,000 Mobile Home, Etc all on credit cards. I Always Pay Several times my Min Payment Each Month----Min is around $100 right now and I pay $600---Was Paying $800 when min was around $200. I Never have had a Problem, always pay them off as soon as I can. I use mainly 2 credit cards--I always work them so I can get the Lowest Interest rate. Good Luck. Randy

[BasicLiving]

Interesting you should post this today. This afternoon, on the way home from work, the local radio station was interviewing someone on this very subject - some sort of "debt expert" or something - and she was asked about credit cards that offer 0% interest for 6 months. She replied similarly to many of these posts:

It's only a deal if you are in debt and can use the 6 months to "catch up"
It's best if you will pay the balance in full prior to the 6 months
If you take advantage of it, DO NOT charge ANYTHING else on that account

I have taken advantage of this in the past when I could not get the total amount up front, but knew I could pay it off prior to the 6 months. As a rule, we are like you - we do not use credit cards unless we can pay it off in full when the bill comes due. But we all hit low points and need to look at all available options. If you are sure you can pay it off within 6 months and it is your only or very best option, cautiously go for it......

Penny

[mbeaser]

Originally Posted by Jennifer L.

The woman who took my call was happy to replace the card, but she immediately went after me to use their promotion of 0% APR for 6 months on purchases. It just so happens that the credit limit on the card is just about exactly the same amount of money I need for the farm.... She would have been ready to put the money in my checking account for the purchase right that minute if I'd said yes.

If the promotion is for 6 months on purchases and she puts the money in your account, that is not generally regarded as a purchase, but as a cash advance (and most still charge the ~3% balance transfer fee, but some cap it at $75). Be very wary. Also, some companies (like chase) use a 2 month average cycle for billing, so even if you pay it off at 6 months, they will calculate interest in the 7th month on what your balance averaged in month 6 and 7, even though you paid it off (ask me how I know, and how much longer I will hold anything with chase, they had my car loan until today too). Be sure to get ahold of some fine print to read about their offer. Of course, I'm not a financial advisor, I just play one for the Navy

[MorrisonCorner]

LL Bean is a decent card for this sort of thing, but Charles Schwab gives you cash back, Amazon gives you gift certificates good on a lot more than clothing, etc. You can charge the amount, and, since you have the money right now, pay it off immediately.. or you can put your money into a 6 month CD, charge the amount, make the minimum payments (I think you have to make some minimum payments) and 48 hours before you have to start paying interest, pay off the balance with your cashed in CD.

Whatever. Credit isn't scary if you've got the money to pay it off.

[The Paw]

I know this is going to be hard to believe, but I swear it is true...

I had a card that I scrupulously paid off each month, using it for 2 years with not a penny of interest paid. They kept extending the "introductory rate" offer of 2.9% for six months on those cheques you can write on the card.

I wanted to buy some land, and needed to put the lawyers fees and some of the down payment on the card. I had a contract that would allow me to have the cash to pay it out well in advance. Well, the contract got delayed, life had some other complications and I didn;t have the lump sum to pay it off at the end of six months. Here is the weird part:

They phoned me up and offered to drop the standard rate for my card from 18.9% to 8%. I asked what the catch was, did I have to borrow money, pay an annual fee, what? They said no catch. I said (and this is practically verbatim), "my 2.9% rate expires this week, you finally have me over the barrel, and you want to cut the rate in half and there is no catch?"

They said "we just want to keep your business". I said sure. It's a year later, (the balance got paid off within 3 months) and my rate is still half of what it was originally. Go figure....

[pancho]

Credit card companies are not in the business of loosing money. You may pay off the account before you have to pay any interest but they are betting that something will happen. They are usually right. That is their business and they are good at it.
It is very hard to look into the future and see what will happen in the next 6 months or the next year. A lot can happen. The credit card companies are betting something will. They make their money by winning these bets.

[egads1]

Cash advance and credit are 2-different types of "loans". Cash advances are always subject to some type of interest and I can't imagine you getting a better rate on a 6-month CD that would cover the interest and leave anything for you.

[Jeff54321]

Originally Posted by Jennifer L.

In my family we were raised to not use debt. Jennifer

Good.