I received an offer in the mail today for a platinum credit card that’s 0% interest for a year and no fee for balance transfers. What’s to stop me from signing up for a bunch of this sort of card and rotating the balance around and never paying any interest?
If you ever hope to get a loan or a mortgage, don’t do this. These people have long memories, and they’ll tell on you.
They’re not philanthropists, and they’re not offering you something for nothing. They want money, and lots of it, from you, and in the long run, if you sign up for this, they’ll get it.
I think that most likely, the idea is that you’ll sign up for it, but you’ll wind up not qualifying and they’ll set you up with the plan you do qualify for. Then instead of just calling up and cancelling it, you’ll just accept the new terms.
There’s nothing stopping you from doing this. Your credit score may take a ding if you’re applying for a lot of credit or if your debt to credit ratio is too high (percentage of your credit limit).
There are some small catches that could get you in the long run. One would be that you don’t move the balance in time and that after the 0% run is over, you’re stuck with 17.8% interest or something high like that. Another would be that the next offer you get for 0% charges you for moving balances. Make sure that the 0% card doesn’t have annual fees as well. Also, you’ll have to keep your FICO score in good condition to make sure that you keep getting these offers.*
There’s no “big” catch. Just some smaller stuff.
*(A personal word to Chase bank, pretty please stop sending me applications. I’ve gotten literally 4 this week. They’re all for the same card and my paper shredder is getting quite a workout.)
If they try to bait and switch, I’ll just cancel, hey?
Nothing. Plenty of people do it, but I recommend only borrowing an amount you can back up with cash, immediately. Reason being, if you fail to qualify to do a balance transfer to another 0% card, you’ll wind up with a big CC bill that actually accrues interest.
Remember, these deals can go away in the blink of an eye if you pay a little late, and one month’s interest if they jack your rate may sometimes be more than you’d make in a year with this money in bonds or a money market account.
Also, doing this stuff enough times WILL lower your credit score. Whether or not that matters to you is your concern.
Oh yeah. One trick.
If you do this, consider NEVER taking the whole advance.
Any revolving credit line more than 50% used shows as “maxxed out credit card” in the scoring algorithm, and dings you more than it would if you had the same amount of money spread across three cards.
On all the offers like this that I’ve received, there’s some extraordinarily fine print adding that balance transfers are treated like cash advances (which have quite a high associated interest rate, calculated daily).
If not, I’d bet on the scenario Mr. Slant describes.
Read the fine print. Credit cards have some of the deadliest fine print on earth. If you make a late payment, not just on this card, but on any other card you have, the card company can take away that zero % and smack you with 29% plus this plus that.
Basically, they’re hoping you’ll roll up a sizable balance during that first year, like most card users do, and that you’ll make the minimum payment every month, like many people do. They know if you do that, even if you quit using the card, it will take you many years to pay it off.
The card companies share information about you, and if you start jumping from one 0% card to another, they will find a perfectly legal way to bleed you. If you want to “beat the game,” the only way to do it is to pay off your balance every month. That way you never have to pay interest.
Did you know that cash advances cost you a higher interest rate than purchases? They do. That’s why they send you those blank checks with your bill. There are also fat fees for this and that. Read the fine print. The costly details are all right there on the application.
If you really need to borrow money, there are cheaper ways to do it than with credit cards.
You can do that, but it hurts your credit rating to cancel a card. They can legally change your rate without notice; it’s right there in the contract.
It’s actually pretty safe and a smart thing to do if your careful about it.
The catch is that they’re banking on you screwing up in one of several ways.
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You miss a payment or send it late. If you have a minimum due of $100 on July 7th, and they receive it July 8th the offer is null and they immediately jack you up to 20%.
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You transfer $5000 to their card, at the end of the year you have $4000 on their card and they jack you up to 20%. They’re betting you can’t find another card or forgot that they were going to raise your rate and are going to let it ride with them.
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You transfer $3000 to their card for the 0%. A month later you buy something for $150. You get a bill for the minimum due $100. You need to send them $150 + the minimum. Otherwise they apply your payment to the $150 charge, consider you short payed them on the amount due for the 0% offer and immediately jack you up to the 20% rate.
If your smart about it and decide you can make $300 monthly payments to the card consistently and on time each month, you can safely get the card, transfer $3600 to it, cut it up when you get it, and cancel it after the year is up, and have sucessfully borrowed $3,600 at 0%.
They’re betting your not smart enough to do that.
15% of one’s credit score is based on the history of one’s accounts. Anything under a year tends to be treated as new and anything over a year will boost the score. (And the hard inquiry that you got when applying for the card will drop off of the score between a 6 month-12 month time). Cancelling a card that’s under a year should have a negligible affect on your score as opposed to cancelling a long term card which will hurt ya.
I applied over the phone and was approved with a $10,000 limit.
The game is afoot!!
Another post of yes you can get away with it, but you have to be careful and watch for hidden fees and disqualifiers. Some hidden things is a transaction fee, and applying payments to the 0% first - in other words:
to make numbers easy - you take out 10,000 at 0%, you get hit with a $70 transaction fee and also buy another $30 worth of gas on that card.
Now when you get your statment you see the $10,100 on the card, all well and good, no interest and exactly as you expected. Lets say you pay $500 on it.
Next month you expect to see $9,600, but what you see is higher as there is interest on the $70 fee and that $30 gas. The only way to pay off those things that earn the bank interest is to pay all non-interest stuff first.
Again sometimes there are no catches so to speak and fee free and you can make a few bucks on it. I have considered doing that many times but really it just seems like too much risk and I have to keep on these things more then I would like.
It isn’t bait and switch. As AskNott emphasizes, read the fine print. The offer that you read in the mail or watch on TV is for those with the best credit ratings. The fine print says your credit history determines what may be offered to you, and in many cases it’s not the offer in the big print in the ad.
Also, if you make just one late payment the fine print often says they can immediately change their rates with you and notify all of your other accounts as well. This is called universal default. So screw up being late with just one account and watch all of your other credit accounts you may possess change their terms and rates. Notice I said credit accounts and not credit cards. According the site I linked here, "It doesn’t necessarily take being late on big-ticket items such as a car or a mortgage payment to trigger the default clause, Richard explains. ‘It could be for something as innocuous as an overlooked $30 phone bill or a forgotten $20 book club subscription.’ "
So screw up with one account and everything else gets dinged as well.
No wonder the credit companies want you on a long leash. They expect you to run its full length and get choked by one passing car, just so they yank your entire credit chain.
My grandmother has been cashing in her good credit using offers like this. A 0% loan for a year (her credit is good enough that she gets 0% on -all- purchases sans cash advance for a year) is good money to make conservative investments with for a 4.5%+ return.
Keep the money she makes, pay back the card on the year date (or transfer any remaining balance to a new 0% one). She hasn’t paid credit card interest in upwards of 10 years now, and has made quite a bit of extra money by investing some of the credit limit.
Daisy chaining credit balance transfers could result in an immediate halt to the fun. I suspect the keep a pretty close watch on the credit bureau records to prevent any loss of revenue.
NEVER carry a Credit Card balance you can’t pay in full at the end of the month or on demand should the ocasion arise.
I’ve been cycling through 0% credit cards for years, and have carried as much as $18,000 on 6-10 cards at once, without paying interest on purchases or balance transfers, although I occasionally do pay transfer fees (usually about 3%). Throughout this time, my FICO score has remained in the high 700s, which is very good to excellent.
I won’t say that other posters here are lying or crazy, but the following statements do not agree with my experience:
I have taken out a primary mortgage and a six-figure home equity line of credit on the same property with no problems.
I get some offers for 0% on purchases, some for 0% on transfers, and occasionally some for 0% on both.
Like I said, I haven’t paid interest on thousands of dollars of debt for at least five years, maybe more. No one’s “bled” me. And when a card ups the rate unexpectedly, I just transfer it to another 0% card. No problem, no penalties.
Hasn’t happened to me. A month or so before the 0% rate ends, if I haven’t paid off the balance, I transfer it to a new 0% card and cancel the old one. I’ve cancelled at least a dozen cards in the last few years, and, as I said, my credit score is just fine.
I’ve cancelled both new and old cards, and haven’t had a problem.
Hasn’t happened to me or, apparently, to EK’s grandmother.
If you have enough cash in your bank account to pay off the full credit card debt, why have or use a credit card at all? I use a credit card so I can buy things now and pay for them later, and the way I play the game, the loan costs me almost nothing. I have no problem with anyone recommending against going into debt, and for people who are living paycheck to paycheck, it’s good advice. But, let’s face it, it’s not very practical for most people.
I agree with the warnings that Hampshire, kanicbird, and Duckster have given about the underhanded ways in which the credit card companies try to get you to pay their outrageous fees. I’ve heard that a late payment anywhere can cause any or all of your rates to jump. So I was alarmed when I found that I had accidentally missed a payment a few months ago. I braced for the torrent of rate increases. Nothing happened, and my credit rating wasn’t affected, either.
Now, I’m very careful to make sure that I don’t make late payments: as soon as a bill arrives, I check the due date and put a reminder in Outlook to pay it one week before the due date. I routinely pay an amount equal to the balance divided by the number of months left in the 0% rate, so that it should be paid off by that date. And if I can’t quite make it, well, those new 0% offers just keep coming in the mail!
But if you aren’t as systematic and careful about handling your cards, you could easily get hit with ruinous interest fees. The banks are sneaky and are certainly counting on you not to pay attention, not to pay more than the minimum, and to get caught paying their usurious interest rates and fees. But, unlike Las Vegas, it’s possible for the little guy to play this game and win.
You can opt out and be put in the pander file against which prescreen offers are checked:
Just remember, these people are in the business of getting your money, one way or another (not that there’s ***necessarily ***anything wrong with that). Don’t naively think that you’re the one person who can outsmart them; you won’t.