Banking, Credit 

Pay An Annual Fee, Help Poor Banks!

That’s what a credit card advocate said to the Senate Banking Committee… the reason? You’re basically getting an interest free loan from the credit card companies if you are diligent and pay off your loan at the end of the month, then you aren’t making them that much money. If you’re like me, charge a lot of stuff but pay off your entire balance at the end of the month, you’re a “deadbeat” because you’re not making the credit card enough money! No this isn’t a Devil’s Advocate post because I think annual fee credit cards are crap (and I don’t really think I can make much of a case for you to get a card with an annual fee) but I think the reason given by the credit card company advocate is laughable.

When you swipe, the store you’re at pays interchange processing fees, something like 3% or so; but apparently that’s not good enough. It’s not good enough because the credit card companies get approximately 70% of their revenue from interest and penalties, according to the Government Accountability Office, so they obviously want more. The estimated $17.1 billion in penalty fees (not counting interest) the banks are going to get for 2006… that’s not enough. That’s like your latest bonehead highly paid athlete complaining that he needs more money to feed his family. No one has compassion for piggish greed. No one.

If they call someone who just pays their bill a deadbeat, I wonder what they call 0% balance transfer arbitragers (or just folks looking for extra breathing room with 0% balance transfers) and folks who just sign up for credit cards for the bonuses?


Trying for Balance Transfer But Low Credit Limit?

I had a reader send me the following email:

Hi Jim, I just got the Citi mtvU card hoping to get a good balance transfer to pay off something else but they only gave me a $3,000 limit, less than what I was hoping for. What should I do?

Unfortunately, you made the mistake of trying to do a balance transfer with a credit card designed for students. Since it’s designed for students, I wouldn’t expect them to give you a high limit no matter what your income was. In the future, I’d recommend something more mainstream like a Citi Professional (though not that one because the balance transfer is only for 9 months).

Anyway, the only thing I can really suggest is that you take the balance transfer for $3k since you’ve already taken the hit to your credit score (if it’s your only credit application in a while, I wouldn’t worry too much). If you just toss the card, you take the hit and you don’t get the cheap credit.

Now, one thing you can try to do, depending on how long the offer is good for, is to use the card as usual and then request for a credit line increase after six months (most companies won’t consider an increase until six months). So, if the offer is valid for more than 6 months, you can try that route to get more money. The downside to that is that you’re still paying that higher interest debt for that time period, so it may not be worth it.

Anyone else have any suggestions?


Citi 0% Balance Transfer Process Walkthrough

One of my friends recently applied for and was accepted for the Citi Platinum Select Card and wanted to get a 0% balance transfer so that she could pay off some home improvement loan debt a little faster than she would’ve. She almost went to a Bank of America ATM, armed with her new card and PIN, to withdraw all the money she needed before a few astute friends stopped her. Had she gone to an ATM, the withdrawal would’ve been classified as a cash advance, she would’ve missed out on the 0% balance transfer promotional rate and been socked with additional cash advance fees!

Anyway, since she needed to know how to initiate the balance transfer, I figured I’d write a brief tutorial walkthrough (complete with pictures) that explained everything in painful detail… that way I wouldn’t have explain it to anyone else, I could just send them this link. 🙂

(Click to continue reading…)

 The Home 

How 0% Financing on Home Improvement Loans Work

Back in June, I penned an article where I warned that consumers should be wary of 0% financing offers. I wrote that post because oftentimes (I would almost go as far as saying always but universal statements always come back to haunt you) deferred interest continues to accrue even though the loan balance doesn’t change. Well, my same as cash loan (for my windows and sliding door replacements) paperwork just came in, financed by GE Money Bank, and it’s just as I expected. I have $0 in monthly payments for six months but deferred finance charges continue to accrue at an annual percentage rate of 18.24%. If I don’t pay off my home improvement loan before the promotional period, I’ll have to pay $2,944.30 in deferred interest. Windows and doors that I purchased for $7,000 (great deal!) would actually be $9,944.30 (ho-hum deal!).

This same paradigm applies for any 0% promotional financing offer out there – so unless you’re able to pay off the full price before the promotional period (or you can secure better rates), you’re better off not taking the promotional offer because of its awful rate (18.24%!). If you have the cash on hand, you can stick that money into a high yield savings account and treat it like a 6 month balance transfer.


Citi Dividend Platinum Select – My AT&T Universal Cash Replacement

A few weeks ago I wrote about the demise of the AT&T Universal Cash credit card (which was administered by Citi), the gas station, supermarket, and drugstore superstar credit card in my wallet, and the need to find a suitable replacement as soon as possible. With the card being terminated on 6/30/06, I’ve found a replacement and it’s the well-known Citi Platinum Select MasterCard. If you visit the link above you’ll also see a 0% balance transfer offer.

Just like the AT&T Universal Cash card, you’re limited to $300 a year in bonuses ($6000 in gas and groceries per year), and you can only request checks over $50. In effect, I’m swapping my A&T Universal Cash card for a Citi Platinum Select card.

I applied online and within a minute I was accepted, wahoo!, now I have to resist the temptation to turn it into yet another balance transfer arbitrage


Using 0% Balance Transfers to Pay Off Debt

Popular 12 month 0% balance transfer cards:

You hear a lot about 0% balance transfer arbitrage plays (where you get a 0% balance transfer for X months and put it in a high yield savings accounts like Dollar Savings Direct) but you usually don’t see many people recommending you use the 0% balance transfer to pay off anything except other credit cards. Money is money and you can pay off anything with the money from the transfer because you can have them send you a check. So why not use it to pay off things like mortgages or car loans?

I started thinking about this because LAMoneyGuy has an outstanding car loan and a lot of savings at a high yield savings account. He only recently decided to do anything about it. He’s going to get a balance transfer, pay off the loan, and then pay off the balance transfer when it comes due. His situation has no risk because he already has the money in his account. When the transfer reverts back to the 23094820934% it usually is, he can pay it off with the funds that already sit in his account. While it superficially appears that he’s paying off the loan with a 0% BT, it’s only psychological because his situation is no different had he paid off the loan and started playing the arbitrage game.

The reason why people don’t recommend paying off a “safe” loan like a car or mortgage with a “dangerous” loan from 0% balance transfer is because you can’t see into the future. You have 9 or 12 months but what if that time comes and you realize you can’t pay off the extra $2,000 of your balance? Then the rate gets jacked up and you get screwed until you can pay. No one can tell the future and it would be dangerous if you lost your job, was in an accident, or suffered other unforeseen hardship before the loan is fully paid. As with many things in life, it’s a risk if you’re willing to take it.



Making Money With 0% Balance Transfers

I’m joining the herd, I’m going to do the often mentioned 0% balance transfer game where you request 0% balance transfer, put them in an online bank account, and earn a little cash on the side. I’ve written about the downsides in the past but since none of them concern me now, I figured it’s the best time to take advantage of these great opportunities before credit card companies stop offering these 0% rates.

My first card of choice? The credit card because it offers the 0% intro APR on balance transfers for a full 18 months, then the Regular APR, and no annual fee.” I applied entirely online and was approved for a credit limit of $6,600 which amounts to $280.50 (if I put it at FNBO Direct), or $316.80 if I open an HSBC account. (The actual earnings will be less because I’ll be paying taxes and a little bit of the balance each month)

Second card? A credit card that also had the 0% but this time only nine months, but again no balance transfer or annual fee. I was approved for a $4,000 limit which will net me approximately $127.50 pre-tax at 4.25%.

Other have done this and written about it extensively but this will be the first time I’m going to try it. And if you’re curious how these offers are bound to affect your score, Cap at Stop Buying Crap has tracked his FICO score while he’s done these offers.

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