6/17 What's the catch with balance transfer offers? I got one that sounds
really good, 1.99% for the life of the balance with no transfer fee.
Is there any reason not to do this?
\_ Ok, no, all this stuff below is wrong. I checked and the way most
of these work is they require you to a) take out more money that
card every month (some minimum which will vary), and b) any money
you pay off goes towards the lower interest rate money first, the
higher rate you're paying on money from (a) is going to be at
22% or something like that. So, over time you are quickly moving
your money from 1.9% to 22% and paying on a larger 22% base every
month until eventually you have nothing at the lower rate and
everything at the 22% rate. READ and UNDERSTAND the contract
before you do anything. I've yet to see one where you can win. If
you want to do the math, you can get ahead for a short period of
time and then pay off the whole thing when the scales tip against
you but you'll have to get the math right and be really anal about
dealing with this account.
\_ Look, you are just wrong. I am doing this right now with
my AmEx Blue Card and have been doing it for almost a year.
I am pretty sure that the only "good" offers are made to
current customers with good credit ratings, though. -bb
\_ Ok, so what are the terms of your deal? They don't require
a minimum transaction per time period and they let you pay
off the higher rate first?
\_ I just have to pay off the "minimum balance" every
month. I guess that is not defined, so they could
bump that up if they get sick of me having cheap
money. There is no requirement to use the card,
so I don't.
\_ They're usually coupled with a clause where the low rate goes
away if you ever miss or are late with a payment. And of course
they still get to ream you on fees if you ever are late too.
\_ Yes. However, if you are never late then this is not an
issue. Go ahead and do it. Your current agreement has the
same clauses, anyway.
\_ Also, if you make any new charges, I imagine payments will be
credited toward the transferred balance first; so you get nailed
for the full 10-22% APR on new charges until you pay off the
transfer.
\_ No catch, really. I am doing this on a $10k balance. I actually
got six months interest free to start out. Just make sure you
don't miss any payments or use the card for anything else.
[ non-compliant motd entry deleted ]
|_ why do you hate america?
\_ Why do you hate tabs?
\_ They are depending on the laziness and stupidity of the masses.
If you're smart and anal about it, you won't get screwed. READ and
UNDERSTAND the fine print.
\_ if people were smart, they wouldn't have credit card debt in the
first place.
\_ this is not a failure of intelligence. --psb
\_ right. if you're smart (and have luck in the market)
you can make money using cash advances from credit cards.
the above low rate balance xfers make this possible.
\_ what i meant by "this is not a failure of
intelligence" is not that you should use
the money smartly but that everyone knows
paying cc interest rates is insane ... but
some people are undisciplined. it's like
saying "smoking is dumb". --psb
\_ I knew a guy who did that during the boom. He got
completely wiped out. I guess he wasn't smart enough.
I know another guy from many years earlier when every
knucklehead was investing in gold and silver. He
bought silver at around $28 or so. It has never been
that high since. He didn't do it on his credit cards.
I met another guy last year who came in to do vendor
tech support. He was once at a company that went public
and his options were worth about $5m. Someone at the
company told him he wasn't allowed to sell them unless
the company wanted them. He didn't check with anyone
else outside the company and lost his entire $5m of
options (which is why he was doing onsite tech support).
I've never done any of those things but there sure are a
lot of stupid people out there....
\_Yes, Virginia, there really are stupid people...
\_ Borrow $10k at guaranteed lifetime 1.9%. Invest
in 10 yr (or 5 yr) government bonds paying 4.7%.
Make $280/yr on the arbitrage. Why is this stupid? -bb
\_ That won't work. The bonds don't pay out on a
monthly basis, and your CC company will want
monthly payments.
\_ Sure it works, you think of it as buying a
$10k 10 yr bond with $100/mo payments. But
the interest from the bond makes a couple
of payments a year for you. You have to have
the spare cash lying around to be able to make
the montly payment until the interest from
the bond pays, admittedly. -bondboy
\_ Put $10,000 into bonds of $100. Every 6 months
cash out 1 bond and use that money to pay the
interest for the next 6 months. Bonds only
accrue interest every 6 months which is why
you want a bond-size that covers 6 months of
your interest.
\_ Wow, you are even crazier than me! Did
you actually buy 100 bonds, or is this
just theoretical? -bondboy
\_ Theoretical, but what's wrong with 100
bonds?
\_ Transaction costs and just the
sheer hassle of buying and keeping
track of 100 bonds. If there was
enough money involved, it would
be worth it, but not for $100 bonds,
imnsho. -bondboy
\_ Bonds are all written down at the
same time and placed in a
safe-deposit box. Every 6 months
you go to your bank to get and cash
out a bond. Every month you write
a check to the CC company.
\- you know when you figure out
how much you are making per
hour of work, you have to
take off the tax on the extra
income. --psb
There are no taxes on gov't bonds. Well no, Fed _/
taxes, at least. I see the appeal of not having
to "float" the credit card payment, though. If
I get bored enough at work today, I will try
to work out the difference. I guess if you
buy the bonds directly from the Treasury,
this might work. It still ends up being
a lot of work. Just doing it all online,
buying the bonds via E*Trade, etc, is
pretty simple. -bb
\_ how can i learn to be a finance nerd like you guys?
-moron with all assets in checking account
\_ Is this a serious question? My g/f thinks I
should go back and get a CPA, since I
obviously enjoy this stuff more than my
job as a sysadmin. -bb
\_ yes, it's a serious question.
\_ Read The Economist, Smartmoney and
The WSJ. Smartmoney U (from their
front door) is a great way to get
started on learning things like
what bond curves mean. -bb
Start here:
http://www.smartmoney.com/thebasics/?nav=DropTabs
\_ Bonds are the safe option, but there are better investments to make.
Anyway, it is easy to carry a CC balance and a 1.x% is makes sense to
do so. Buy a car with it instead of an auto loan. Do home repairs
instead of an equity loan. You may wonder why anyone would carry
a CC balance, but the reality is that most people will never be debt-free.
The key is cash flow. I'd gladly put millions of $$$ on my CC if I had
that kind of limit and start a business, buy real estate, or whatever.
The "debt is bad" mantra is for foolish Midwestern housewives who read
Motley Fool and who spend 12 hours clipping coupons to save $5. Take
whatever the bank will give you, because most of us will not save that
kind of money (hundreds of thousands of $$$) easily and it can lead to
opportunity. Obviously using the CC money for vacations and stereo
equipment is stupid, but having a balance in itself is not. I know lots
of people who started businesses on their CC. Think bigger than *bonds*
Jesus! Those Midwestern wives would be excited about $280/year, though.
\_ Yeah, maybe someday I will be in a position to start my own business
or do something like that. But in the meantime, I am having fun and
making money, while learning how to make this stuff work. -bb
\_ At least you realized that assets - liabilities is more important
than being debt-free. I don't care if I have $10 billion in debt
if I have $100 billion in assets. Debt-free is just as idiotic
as debt-laden. |
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