Have you played the 0% interest credit game? I guess I knew it was possible but I didn’t know how popular this was until a client of ours told me about it.
Like I do, you undoubtedly get bombed with numerous credit card offers each week. Most of the time I throw them out, but if you take the time to read them carefully, you may be passing up an opportunity. The “game” is played by holding a large amount of unpaid debt that you continue to transfer around to new cards, one after another, and basically avoid paying any interest!
So here’s the way I read it. Each of these cards have an initial period where they offer 0% interest provided that you pay the minimum monthly payment. Before the initial period expires, you need to have identified and opened a new card and transfer the balance onto it. If you miss the timing then you will face substantial interest due.
There is another ‘catch’ in that most of the cards I found (Balance Transfer Credit Cards or Compare 200+ Credit Card Offers) have a balance transfer fee of about 3%. The way I see it is that even if you can’t get a card with a 0% transfer fee, you still just paid 3% interest for a whole year. That’s WAY better than even an equity line at prime + 0 (7.5% today)! My client was telling me that she knows people doing this with $100’s of thousands of dollars in debt.
But there is a downside. Carrying a lot of rotating debt on credit cards will hurt your overall credit rating if you go to get a home or car loan. Also, there may come a time when you cannot qualify for a card when you need to make a transfer.
However, there is a big different between borrowing money to buy consumer goods versus borrowing money at a discount for the chance of making a higher return investment. For example, if I were to give this a try, first off I would make sure I could pay off the credit card fully whenever needed. Then, I would get a 0% interest card that allowed new charges AND allowed cash advances to be made interest free for an entire year. I would use the cash advance blank checks that come with the statement to deposit money into my investment account and away I’d go – buying stocks, mutual funds, ETFs, whatever.
Fine print: Not FDIC Insured. Not Guaranteed. May Lose Value. May Hurt Your Credit.
Have you ever done this 0% interest game? Do you know anyone who has done this? I’d like to hear from someone who has done, or is doing this to see how successful you’ve been.
As always, we appreciate your comments.