0 Percent CC - how to take advantage

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Palatineman
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0 Percent CC - how to take advantage

Post by Palatineman » Sun Jul 23, 2017 11:06 am

Just got approved for 4 Credit Cards that offer a bonus on min spend of 3K which will net me $850 in bonus money.

The struggle that I am having (if you want to call it that), is that I have obtained $62K in additional credit limits which allow 0 Percent financing for 12-15 months around these 4 cards.

I can take advantage to a certain point on pre-paying some utility bills (4K max) to get the bonus money, but will never achieve the spend to utilize the additional 58K available to me.

I have everything I need from a material standpoint (house, car, rental property) and enough in Savings (130K), in case I lose my job. So not looking to make a major purchase any time soon.

I understand this is a good problem to have, but am looking for some rational ideas on how to leverage this available credit (with no interest), I have never had before.

My total available credit on all CC's is now $172K, if I maxed out the $62K would still leave me with a decent (not ideal) credit utilization ratio.

Any experiences and insights with this is highly appreciated!

By all means, I feel like a very fortunate person, considering my past struggles and I realize most people have much larger issues in getting through the challenges of life.


Best wishes!

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Ketawa
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Re: 0 Percent CC - how to take advantage

Post by Ketawa » Sun Jul 23, 2017 11:10 am

Meet the minimum spend to get the bonuses on your new cards, then shift your spending back to cards that offer regular cash back or bonus points that you will use, e.g. Citi Double Cash, AMEX Blue Cash Preferred, PenFed Cash Rewards, Chase Freedom, Chase Sapphire Preferred (these are the 5 that I currently use for regular non-minimum spending).

What could you possibly do with a massive amount of money that has to be paid back in a year? I wouldn't do anything except put it in a savings account or CD. Those offer lower returns than simply putting the spend on a minimum 2% cash back card in the first place.

Palatineman
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Re: 0 Percent CC - how to take advantage

Post by Palatineman » Sun Jul 23, 2017 11:26 am

Hi Ketawa - thanks for the quick response.

The min spend is not the issue - will obviously happen.

The cash advance for the CC's are limited and don't qualify for the 0 percent offer.

Hence the dilemma.

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Ketawa
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Re: 0 Percent CC - how to take advantage

Post by Ketawa » Sun Jul 23, 2017 11:29 am

Palatineman wrote:Hi Ketawa - thanks for the quick response.

The min spend is not the issue - will obviously happen.

The cash advance for the CC's are limited and don't qualify for the 0 percent offer.

Hence the dilemma.
My point is there is no dilemma. There's no reason to bother trying to use up the extra 0% limit, since you can do better by simply spending on your regular credit cards. The only reason would be if you had a need for a lot of extra cash now for which your wouldn't be able to pay off the entire monthly balance that would resolve itself within the next year.

Palatineman
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Re: 0 Percent CC - how to take advantage

Post by Palatineman » Sun Jul 23, 2017 11:40 am

These new CC's offer me a 1.5 cash back bonus on my spend, so better than my current CC's,

I just don't spend as much through the year as many others on regular spend (I am single and frugal enough).

The mortgage and loan/lease payments I have will require a 2-3 percent fee, so that does not provide any advantage.

I

Ron Ronnerson
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Re: 0 Percent CC - how to take advantage

Post by Ron Ronnerson » Sun Jul 23, 2017 11:58 am

Prepaying a big amount on your utility bills may not be great either. Factor in inflation. I've prepared a few months of my electric bill to meet minimum spending requirements for a bonus but wouldn't do $4k.

Just because a credit line exists doesn't mean you have to use it. You could just do your normal spending, pay the minimum amounts, and then pay off the card in full before the 0% deal is up. Be careful, though. You have to have in the bank whatever amount you're charging on the card to get rid of the debt at a moment's notice.

Also, each credit line needs to be looked at separately. Don't max out any of the cards.

Charging tens of thousands of dollars onto credit cards has the potential to lower your credit score so don't do this if you'll possibly need a loan.

Personally, I wouldn't bother with your idea and just pay off the cards in full each month. It's risky even if you are in great shape to pay it all off in a year. For example, a few years ago, mortgage rates dropped enough to make refinancing my house worthwhile. An excellent credit score rather than merely "good" helped me get the best rate available. That's ended up saving us a lot of money. Not having much debt but a big credit line helped a great deal with the credit score.

Palatineman
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Re: 0 Percent CC - how to take advantage

Post by Palatineman » Sun Jul 23, 2017 12:20 pm

Thanks for you response Ron!

I have refinanced all of my properties and do not expect to take out a new loan anytime soon, including an auto one as I have a year and half left on my lease.

I have zero debt on my credit cards right now. My credit score (currently 800 plus) will not take any significant hit for $4K out of the available $172K limit and it won't matter after 12 months since I will have available cash to pay it off immediately.

A 2 percent CC utilization ratio will mean nothing and I won't be earning 1.1 in my online savings account for the next 12 months if I pay it off immediately.

The point here is to try to take advantage of the free money I have available at 0 percent for the next 12-15 months. I have the liquid cash to pay off whatever I charge immediately, barring any unforeseen circumstances.

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whodidntante
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Re: 0 Percent CC - how to take advantage

Post by whodidntante » Sun Jul 23, 2017 2:04 pm

Risk free returns are low. You could buy short term CDs and use online savings accounts to earn in the neighborhood of 1.5%. That will probably lose to inflation, but since the money is borrowed at 0% you have a no cost inflation hedge. To get more, you have to risk a loss, which may or may not be fine in your situation. I take risk with money I have to pay back in a year, but it's not for everyone. I treat this borrowed money the same as the rest of my money.

Money is fungible, so to implement this you put normal spending on a 0% credit card and then dial back your payments to the minimum. Then positive cash flow goes into the investment of your choice.

Ron Ronnerson
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Re: 0 Percent CC - how to take advantage

Post by Ron Ronnerson » Sun Jul 23, 2017 3:31 pm

Palatineman,

Perhaps I misunderstood. I thought you wanted to try to take advantage of the $62k of new credit line that's available at 0% for 12-15 months. In your response, you mention $4k. That's a big difference and I'm not sure how much you're looking to charge.

In any case, if you'd like to spend some money, you could buy gift cards to places where you would typically make purchases anyhow. I wouldn't want to sit on $62k worth of gift cards but $4k may be achievable. You could also think about moving up the date you incur upcoming expenses (such as home renovations, medical procedures, gift purchases for holidays and birthdays, etc.)

Keep in mind that you may be giving up cash back/points/miles on other cards you could possibly use for greater benefit.
Last edited by Ron Ronnerson on Sun Jul 23, 2017 4:24 pm, edited 1 time in total.

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Taylor Larimore
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One credit card or more?

Post by Taylor Larimore » Sun Jul 23, 2017 3:56 pm

Palatineman:

I have one credit card.
Our life is frittered away with detail. Simplify. Simplify. -- Henry David Thoreau
Best wishes
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

takeshi
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Re: 0 Percent CC - how to take advantage

Post by takeshi » Mon Jul 24, 2017 7:45 am

Palatineman wrote:I can take advantage to a certain point on pre-paying some utility bills (4K max) to get the bonus money, but will never achieve the spend to utilize the additional 58K available to me.
Don't assume that you should max these new tradelines. Extended credit is not money. It's extended credit.
Palatineman wrote:My total available credit on all CC's is now $172K, if I maxed out the $62K would still leave me with a decent (not ideal) credit utilization ratio.
Assuming you have no balances reporting on the other cards, maxing out the new cards would put you at 36%. General recommendation is to never exceed 30%. 30% is not an ideal. It is a suggested maximum. Ideal Revolving Utilization is in the single digits. Revolving Utilization doesn't just matter across all your cards but for each individual card as well At 90% a card is considered maxed and is a major red flag to creditors. You don't want a bunch of new cards maxed out on your reports. Once creditors start taking adverse action it can easily spiral downwards as other creditors pile on as a result of the initial adverse action.

Additionally, it's not just about Revolving Utilization. Percentage of cards with reported balances also plays a role and you want to keep this number low as well. Your 4 new accounts also present a bit of a credit risk already and now you're looking to make yourself look even riskier? Regardless of %, $62K is a lot of debt.

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jabberwockOG
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Re: 0 Percent CC - how to take advantage

Post by jabberwockOG » Mon Jul 24, 2017 7:58 am

There is a good business reason that many CC companies make these 0% offers. Retail consumer credit lines are not meant to be leveraged. Take advantage of CC sign up spend bonuses, regularly use points or money back cards for all spending, but strongly suggest you not play money games with 0% CC offers.

techrules
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Re: 0 Percent CC - how to take advantage

Post by techrules » Mon Jul 24, 2017 9:47 am

I appreciate the conservative approach on this site, but I hold a slightly more adventurous position.
I had a HELOC that had a promo rate expiring, I was originally planning on paying it off in the next 18 months.
I opened new credit cards, leveraged the new credit lines at 0% to pay off the heloc, and instead of paying 4.5% on a HELOC,
am now paying 0% for the remaining duration.
I am saving the difference between my expected HELOC payment and Credit card payment amount into a high interest CD/ Savings account.
At the end of the 18 month promo I will pay off all the credit cards.

All of this with a caveat that you have the financial flexibility to be able to pay off the HELOC on your own with either previous savings or other savings, in case the banks decide to pull the 0 % APR.

drg02b
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Re: 0 Percent CC - how to take advantage

Post by drg02b » Mon Jul 24, 2017 9:56 am

I leveraged part of a house rehab through 0% CC's -- gave me just enough cushion/comfort financially to have 15-21 months free interest while still maintaining a significant chunk of savings. Once I had the cushion rebuilt, I still paid them off a couple months early.

I've thought about churning free interest cards, but every time I think about the potential earnings (via savings or CD), it just doesn't seem worth it.

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Ketawa
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Re: 0 Percent CC - how to take advantage

Post by Ketawa » Mon Jul 24, 2017 1:46 pm

techrules wrote:I appreciate the conservative approach on this site, but I hold a slightly more adventurous position.
I had a HELOC that had a promo rate expiring, I was originally planning on paying it off in the next 18 months.
I opened new credit cards, leveraged the new credit lines at 0% to pay off the heloc, and instead of paying 4.5% on a HELOC,
am now paying 0% for the remaining duration.
I am saving the difference between my expected HELOC payment and Credit card payment amount into a high interest CD/ Savings account.
At the end of the 18 month promo I will pay off all the credit cards.

All of this with a caveat that you have the financial flexibility to be able to pay off the HELOC on your own with either previous savings or other savings, in case the banks decide to pull the 0 % APR.
Help me understand what you did. How did you leverage the new credit lines at 0% to pay off the HELOC? Usually these promo rates (at least on the cards I have seen) do not apply to cash advances, so I'm not sure how one would pay off a HELOC with a credit card. The way around this would be to charge regular spend to the 0% credit card, but that means forgoing regular cash back or bonus rewards, so it has its own opportunity cost which is typically higher than the potential savings from a CD or savings account.

fantasytensai
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Re: 0 Percent CC - how to take advantage

Post by fantasytensai » Mon Jul 24, 2017 2:02 pm

Ketawa wrote:
techrules wrote:I appreciate the conservative approach on this site, but I hold a slightly more adventurous position.
I had a HELOC that had a promo rate expiring, I was originally planning on paying it off in the next 18 months.
I opened new credit cards, leveraged the new credit lines at 0% to pay off the heloc, and instead of paying 4.5% on a HELOC,
am now paying 0% for the remaining duration.
I am saving the difference between my expected HELOC payment and Credit card payment amount into a high interest CD/ Savings account.
At the end of the 18 month promo I will pay off all the credit cards.

All of this with a caveat that you have the financial flexibility to be able to pay off the HELOC on your own with either previous savings or other savings, in case the banks decide to pull the 0 % APR.
Help me understand what you did. How did you leverage the new credit lines at 0% to pay off the HELOC? Usually these promo rates (at least on the cards I have seen) do not apply to cash advances, so I'm not sure how one would pay off a HELOC with a credit card. The way around this would be to charge regular spend to the 0% credit card, but that means forgoing regular cash back or bonus rewards, so it has its own opportunity cost which is typically higher than the potential savings from a CD or savings account.
One possible way is to use the 0% CC to buy money orders which can be deposited/applied towards the balance of a HELOC.

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flamesabers
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Re: 0 Percent CC - how to take advantage

Post by flamesabers » Mon Jul 24, 2017 4:41 pm

OP,

Once you meet the minimum spending requirements for the bonuses, I don't think there is a good reason to try to rack up $62k of credit card debt just to get the 0% interest rate for 12-15 months. Best case scenario is you end up buying a bunch of stuff/services you wouldn't ordinarily purchase. Worst case scenario is you end up having to deplete almost half of your $130k savings to payoff your debt before the interest rate goes back to normal. There is also the risk that as you get closer and closer to maxing out each of these new credit cards, the issuer might decide to cancel the 0% offer, freeze the card and demand immediate payment. Unless you're going to make a major purchase that you would have made anyway without the 0% offer, I strongly advise against racking up a big balance on these cards.

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prudent
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Re: 0 Percent CC - how to take advantage

Post by prudent » Mon Jul 24, 2017 4:58 pm

Ketawa wrote:Help me understand what you did. How did you leverage the new credit lines at 0% to pay off the HELOC? Usually these promo rates (at least on the cards I have seen) do not apply to cash advances, so I'm not sure how one would pay off a HELOC with a credit card. The way around this would be to charge regular spend to the 0% credit card, but that means forgoing regular cash back or bonus rewards, so it has its own opportunity cost which is typically higher than the potential savings from a CD or savings account.
Years ago I did balance transfers from 0% cards to the credit card linked with our HELOC. That avoided a cash advance fee.

Palatineman
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Re: 0 Percent CC - how to take advantage

Post by Palatineman » Mon Jul 24, 2017 9:18 pm

"OP,

Once you meet the minimum spending requirements for the bonuses, I don't think there is a good reason to try to rack up $62k of credit card debt just to get the 0% interest rate for 12-15 months. Best case scenario is you end up buying a bunch of stuff/services you wouldn't ordinarily purchase. Worst case scenario is you end up having to deplete almost half of your $130k savings to payoff your debt before the interest rate goes back to normal. There is also the risk that as you get closer and closer to maxing out each of these new credit cards, the issuer might decide to cancel the 0% offer, freeze the card and demand immediate payment. Unless you're going to make a major purchase that you would have made anyway without the 0% offer, I strongly advise against racking up a big balance on these cards."

Thanks for your thoughts! I have become a pretty risk averse person as I get older to begin with.

This is why I have the $130K funds that are liquid that could help mitigate any potential disaster.

The intent is to not buy anything that is unnecessary, but to see if I can "leverage" this sudden availability of funds that are available at 0 percent, from a creative standpoint that I may not have thought of.

MDfive21
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Re: 0 Percent CC - how to take advantage

Post by MDfive21 » Tue Jul 25, 2017 11:38 am

OP, two terms you should know and google.

1. interest rate arbitrage
2. manufactured spend

unfortunately with interest rates as low as they are, the arbitrage is not profitable enough to be worth the risk, time and effort involved in making it work. most current manufactured spend opportunities are complex and/or obscure. it's not as easy as vanilla reloads and grocery store money orders any more.

techrules
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Re: 0 Percent CC - how to take advantage

Post by techrules » Tue Aug 08, 2017 10:25 am

Ketawa wrote: Help me understand what you did. How did you leverage the new credit lines at 0% to pay off the HELOC? Usually these promo rates (at least on the cards I have seen) do not apply to cash advances, so I'm not sure how one would pay off a HELOC with a credit card. The way around this would be to charge regular spend to the 0% credit card, but that means forgoing regular cash back or bonus rewards, so it has its own opportunity cost which is typically higher than the potential savings from a CD or savings account.
Bank of America allows you to balance transfer to a HELOC or Car Loan or Student Loan.
Chase allows you to balance transfer to other credit cards only.

So
1. Transfer balance from HELOC to Bank of America CC (0 APR/ 0 BT Fees)
2. Transfer balance from Bank of America CC to Chase CC (0 APR/ 0 BT Fees)
3. Another balance transfer from HELOC to Bank of America CC (0 APR/ 0 BT Fees)
4. Transfer balance from Bank of America CC to spouse Chase CC (0 APR/ 0 BT Fees)
5. Another balance transfer from HELOC to Bank of America CC (0 APR/ 0 BT Fees)

Repeat for any number of credit cards until balance on all cards is full or time runs out.
You normally have 60 or 90 days from the day you open a credit card to request balance transfers.
I was able to complete all the steps above in 30 days from card opening date. All cards were opened on the same day.
Caveat to the above being that I was planning to pay off the HELOC in 18 months anyways and I dont have any major purchases where my credit utilization of 100% for these cards may make a dent.
I now benefit from not paying any interest for the 18 months.

I can continue using my regular card for regular expenses and maximize cash back/bonus.

techrules
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Re: 0 Percent CC - how to take advantage

Post by techrules » Tue Aug 08, 2017 10:29 am

fantasytensai wrote: One possible way is to use the 0% CC to buy money orders which can be deposited/applied towards the balance of a HELOC.
This still have a minimal cost. Transferring balance directly from your HELOC to credit card is offered by some credit cards. I used that feature instead of doing a manufactured spend.

techrules
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Re: 0 Percent CC - how to take advantage

Post by techrules » Tue Aug 08, 2017 10:33 am

flamesabers wrote:OP,

Once you meet the minimum spending requirements for the bonuses, I don't think there is a good reason to try to rack up $62k of credit card debt just to get the 0% interest rate for 12-15 months. Best case scenario is you end up buying a bunch of stuff/services you wouldn't ordinarily purchase. Worst case scenario is you end up having to deplete almost half of your $130k savings to payoff your debt before the interest rate goes back to normal. There is also the risk that as you get closer and closer to maxing out each of these new credit cards, the issuer might decide to cancel the 0% offer, freeze the card and demand immediate payment. Unless you're going to make a major purchase that you would have made anyway without the 0% offer, I strongly advise against racking up a big balance on these cards.
In my scenario, I did not have to purchase anything.
If the credit card company freezes the card and demands payment, I can always take the cash back from the HELOC and pay off the credit card. The most I would lose is a few minutes of button clicks to transfer from HELOC back to the credit card.

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Alexa9
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Re: 0 Percent CC - how to take advantage

Post by Alexa9 » Tue Aug 08, 2017 10:34 am

I would max them all out on money orders or gold bars and then buy call options on AAPL, GOOG, and/or AMZN. :wink:

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Re: 0 Percent CC - how to take advantage

Post by bloom2708 » Tue Aug 08, 2017 10:36 am

The tail is wagging the dog with all these credit cards.

The manufactured spend needed to get small rewards will exceed the rewards.

Keep 1 or 2. Close the rest. Life is too short. Having $172k of available credit card limits is just not necessary.
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

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