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Another 0% promotional APR offer - what's the catch?
Old 09-04-2011, 07:28 AM   #1
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Another 0% promotional APR offer - what's the catch?

From an existing credit card that I currently carry as a back up card. I would not be applying for a new card to take advantage of this offer.

I generally never pay attention to credit card promotions but I read this one... 0% promotional APR offer until 7/12 for up to 20k. Fee is 1% of transaction.

I have a mortgage on an investment property. The rate is 4.125% which is extremely low as it was previously my primary residence. I generally pay an extra 500 a month as I want to pay it off sooner vs. later. If I don't add any more rental property investments, I hope to pay everything off within the next 5 - 6 years with some lump sum payments.

The Good
- save about $500 for the duration of this promotion
- assists in long term goal as the $500 would be applied as an extra payment

The Bad
- using credit card and on credit reports, but still have room on card and other cards for daily and emergency needs
- fee of 1%, but subtracted from savings already
- time to set-up monthly automatic payment, about 5 minutes
- if not paid, 12% interest rate from the beginning of loan (this will never happen)

I know some will say it's not worth the hassle, let's face it, you probably have more $$ than me! But, in my stage of life, $500 is $500 and would be nice in my pocket.

What's the catch with credit card promotions like this?
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Old 09-04-2011, 08:59 AM   #2
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I've used these type promotions in the past, actually within the last 6 months. I used them to pay for home improvements we were making. I could have taken the money out of a CD but would have lost 4.5% interest. Promotion is good until June 2012 at 0%, at which time I will take RMD out of IRA and pay the promotion off in full. Your's is especially good at 1% transaction fee.

I always wonder how many people miss the end payment date and then it costs them a bunch of interest?
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Old 09-04-2011, 09:10 AM   #3
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I've done credit card arbitrage twice for 15k and 12k (both at the same time, my name and my wife's name). This was years ago. Worked out exactly as you described, paid the minimum for about a year, then paid them off for ~10k each before they were gonna start earning interest.

I'd imagine it's a terrible idea for most people, and fine for most e-r posters.
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Old 09-04-2011, 09:18 AM   #4
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You would have to be ready financially for a personal black swan event to guarantee "(this will never happen)". My black swan was a flood that took out my home AND my banks. Yes plural banks. I had money, but couldn't get to it for a few months and at one bank, nearly two years! What about a large health issue, the most common way to bankruptcy?

The $500 is nice but the risk has a small probability of a high cost. That is the hook. Most people will underestimate their downside risk and 12% is in Guido-the-loan-shark territory.

That said, early in our marriage, my wife used revolving card debt to finance a college bill that ended up with only a few dollars in fees. It worked out. It also caused a huge rift in our marriage for a long time.
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Old 09-04-2011, 11:22 AM   #5
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Thanks for the comments and sharing. I'll call them just to confirm my understanding.

@ Devans - sorry to hear about your black swans. While "never" is a strong word, I will take extra precautions to ensure I don't end up paying any interest. I paid for my first year of college with revolving credit, not ideal, but my only option at the time. It worked out for me.
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Old 09-04-2011, 11:29 AM   #6
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The 1% fee makes this a non-deal. Are there not 0%-rates with no fees out there? There certainly have been in the past. I strung along USAA for 3 years with one.
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Old 09-04-2011, 12:22 PM   #7
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While I was still paying on my mortgage, I got way behind on my CCs, and I depended on deals like this. In fact, when the promotional periods ended, I usually did not have the balance paid, so I'd look for another promotional deal on another card I could transfer the balance to. I got quite a few new CCs for the sake of promotions. So long as you can keep paying attention, it works just fine. Sometimes bad things happen if you miss a monthly minimum payment on your card balance.
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Old 09-04-2011, 01:09 PM   #8
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Quote:
Originally Posted by LOL! View Post
The 1% fee makes this a non-deal. Are there not 0%-rates with no fees out there? There certainly have been in the past. I strung along USAA for 3 years with one.
I get these offers in the mail every couple weeks. There are a lot of 0% interest offers for up to a year, but I've never seen one with a zero fee.
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Old 09-04-2011, 06:31 PM   #9
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Only 0% APR loans I've seen are for new vehicle purchases, but I have not always read them in detail.


Quote:
Originally Posted by JOHNNIE36 View Post
I get these offers in the mail every couple weeks. There are a lot of 0% interest offers for up to a year, but I've never seen one with a zero fee.
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