Get money from 0% credit card advance or home equity loan?

[Barbara]

We are thinking about using the O% fixed rate (until June 2007) for a cash advance with 3% transaction fee. We have two seperate offers for new credit cards and already had a offer (0% until Oct.) from an existing credit card with a 0 balance.
We are also considering using a home equity loan between 6.99% - 7.75% with no closing costs to be able to deduct the interest on income tax.

Which do you recommend and what should we consider that we may not be thinking about. I value your knowledge and opinions.

Thanks.

 

[JoeMid]

What tax bracket are you in?

How long do you want the term to really be?

You do the math.

If you pay off the O% fixed rate (until June 2007) before interest kicks in, you've effectively paid close to 3% p.a.

 

[gmarine]

If your going to pay the credit card balance off right away then I would lean towards that. If not then the home equity loan.

FWIW, if you mean you are taking this loan to buy a timeshare then it is a bad idea. Financing a timeshare in general isnt a good idea.

The only way I would do it is if with the credit card and paying it off with very little interest paid. Otherwise wait until you can buy one for cash.

 

[huestous]

Barbara,

If you have the time, shop around for different credit cards first. We typically float ~$30K interest-free money with no transfer fees all year (leap-frogging 4-6 month timing between required payoff dates).

You've just got to be sure that you don't charge anything to the cards during the float, else you begin accruing finance charges.

 

[Rose Pink]

We typically float ~$30K interest-free money with no transfer fees all year (leap-frogging 4-6 month timing between required payoff dates).

What happens if those 0% offers dry up? Then are you stuck with 30K financed at credit card rates?

 

[geekette]

I don't think the 0%'s are going to disappear, since we've been taking advantage of them for years and continue to get offers every week. We never pay a balance transfer fee, those go into the trash.

 

[huestous]

What happens if those 0% offers dry up? Then are you stuck with 30K financed at credit card rates?

We park the cash in short term CD's, typically 90 day. The CD's are allowed to rollover if follow-up offers are received on alternate cards. Else we can cash out and pay off the card.

Depending on the credit union or bank that you work with, the 0% interest cash that you are floating can bump the account balance to a preferred status that gives other benefits as well.

 

[Rose Pink]

This is interesting. You are earning interest on someone else's principal (which is what banks do). Maybe I won't be so quick to shred those credit card offers in the future.

 

[RonaldCol]

I also believe there is a cap of up to $75 for the one-time transaction fee, based on 3% of the money borrowed. So, if you took out a $30,000 credit card advance, it would be $75 maximum and not $900. If the advance is for a year, then the annualized interest rate is a mere 0.0025%. If for half a year, then it's 0.005%

 

[JoeMid]

I also believe there is a cap of up to $75 for the one-time transaction fee

I've never received a 0% offer with the cap on the transaction fee you believe.

 

[Jennie]

Read the fine print carefully. Some cards, especially Providian, offer 0% until the summer of 2007 if you make a balance transfer. However the 0% is only on purchases made during that period. The balance transfer interest is around 7%. I've been taking advantage of these offers for years and yet this one fooled me.

In recent months, due to the current high interest rates, there have been far fewer offers with a low max fee; usually it was between $50. and $75..Now there is generally a 2% or 3% upfront fee on the whole amount borrowed. I always call and ask if they can give me a better rate. Sometimes they offer 0.9% or 1.9%.

Keep in mind too that new rules allow them to bump a low rate up to an exorbitant rate, like 21%, if you are late making a payment on ANY credit card or bill, even if it has nothing to do with their company.

I made a good profit in the stock market over the past 3 years using all that "free" money. The offers still pour in every week but the terms are no longer worthwhile.

By the way, you can usually write one of the checks to yourself and deposit into your bank account instead of using it to directly pay off another loan. Many companies will wire the funds into your account at no extra charge. I have read articles stating that this is a better way to go. If you send a balance transfer check to pay off the balance on another credit card, the info is supposedly entered into the system in such a way that it lowers your FICO score and discourages other cretit card companies from offering you good balance transfer deals. They say that it is better to have the funds from the present offer deposited into your bank account and then pay off the other company with your own personal check.