Am I throwing away money?

[pizza1]

My opinion is, Im not gonna go out and purchase a big ticket item, or rack up a bunch of debt just to carry a balance and take advantage of a 0% period/offer.

If you already have a big balance to begin, then I can see rolling it into a 0% offer, but....arent you only like 18yo? What would you possibly need to take advantage of this at that age? or are you thinking of this for you Dad and your AU accts.

[Open123]

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@Anonymous wrote:
Can someone please break down for me how PIF during a 0% promo is throwing away money?

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For example, if you PIF $20K as opposed to over time, then you potentially lose out on the opportunity cost (interest earned and inflationary erosion) on utilizing the $20K today, and paying the loan with "less valuable" dollars tomorrow.

All things equal, because of the inflationary pressures inherent in all fiat currencies, money is always worth more today, than at some future unknown date.  Historically, this is why a return of 2% - 3% is considered a ZERO real return, since it only keeps pace with historical inflation.  Any return less than inflation would be a negative return.

[UncleB]

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@Anonymous wrote:
Can someone please break down for me how PIF during a 0% promo is throwing away money? Eventually the bill needs to be paid. Whether immediately or later the same amount will be owed and due so what money is being thrown away? Feel like Im missing something.

btw I've done both scenarios. Whatever I'm comfortable with at the time is what happens.

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+1

I'm with you, HeavenlyFlower, I don't see it as throwing anything away at all.  For me, having 'flexibility' during that period of time to pay a little less some months, or to get a large balance 'knocked out' is what the promo period is all about.

I've read, though, about folks who will keep the cards on promos 'maxed' during the 0% period and invest the funds.  Then, right before the promo expires, they 'cash out' the investment and pay off the account, pocketing the difference.  While I can understand 'theoretically' how that works, I'm just a 'regular guy' and my credit lines aren't high enough for a 12 month investment of that amount to make a real difference... and I also don't have the liquidity to be comfortable with the possibility that the investment could go the 'other way'.

I don't mean to be critical of folks who do that, though... it's just not for me.

[CreditCuriosity]

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@Open123 wrote:

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@Anonymous wrote:
Can someone please break down for me how PIF during a 0% promo is throwing away money?

---

For example, if you PIF $20K as opposed to over time, then you potentially lose out on the opportunity cost (interest earned and inflationary erosion) on utilizing the $20K today, and paying the loan with "less valuable" dollars tomorrow.

All things equal, because of the inflationary pressures inherent in all fiat currencies, money is always worth more today, than at some future unknown date.  Historically, this is why a return of 2% - 3% is considered a ZERO real return, since it only keeps pace with historical inflation.  Any return less than inflation would be a negative return.

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Basically what he said you can possibly yield better returns by a different method although with the market and rates as they are now it is kinda a wash.  So I just PIF usually otherwise say if I knew I could make a 10% return in 12 months on 20k on a 0% card then I would carry said balance and the card would work "more for me"

[pizza1]

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@UncleB wrote:

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@Anonymous wrote:
Can someone please break down for me how PIF during a 0% promo is throwing away money? Eventually the bill needs to be paid. Whether immediately or later the same amount will be owed and due so what money is being thrown away? Feel like Im missing something.

btw I've done both scenarios. Whatever I'm comfortable with at the time is what happens.

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+1

I'm with you, HeavenlyFlower, I don't see it as throwing anything away at all.  For me, having 'flexibility' during that period of time to pay a little less some months, or to get a large balance 'knocked out' is what the promo period is all about.

I've read, though, about folks who will keep the cards on promos 'maxed' during the 0% period and invest the funds.  Then, right before the promo expires, they 'cash out' the investment and pay off the account, pocketing the difference.  While I can understand 'theoretically' how that works, I'm just a 'regular guy' and my credit lines aren't high enough for a 12 month investment of that amount to make a real difference... and I also don't have the liquidity to be comfortable with the possibility that the investment could go the 'other way'.

I don't mean to be critical of folks who do that, though... it's just not for me.

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+1000

Totally agree here! Im just a regular gal, and  also dont ever antipate needing the %0 offers, my spend doesnt warrent it to begin with, and I dont see myself ever carrying balances, so...

[Open123]

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@CreditCuriousity wrote:

Basically what he said you can possibly yield better returns by a different method although with the market and rates as they are now it is kinda a wash.  So I just PIF usually otherwise say if I knew I could make a 10% return in 12 months on 20k on a 0% card then I would carry said balance and the card would work "more for me"

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Right, the ideal time at which to borrow money is when the rates are low with future inflation.  You borrow money now with 0% fixed rates, and pay them back a year or two with lesser valued dollars. 

[Open123]

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@UncleB wrote:

I've read, though, about folks who will keep the cards on promos 'maxed' during the 0% period and invest the funds.

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I've done this my entire life.

Take out 0% loan, make minimal monthly payments, and pay off with a balloon payment.  In the meantime, utilize the funds for a higher return. 

[UncleB]

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@Open123 wrote:

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@UncleB wrote:

I've read, though, about folks who will keep the cards on promos 'maxed' during the 0% period and invest the funds.

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I've done this my entire life.

Take out 0% loan, make minimal monthly payments, and pay off with a balloon payment.  In the meantime, utilize the funds for a higher return. 

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I would love to be in the position some day to do so myself, but it's a bit far off for now... if that day comes, expect a PM from me! 

[tntexans72]

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@Anonymous wrote:
For not using my 0% promotions on my cards that have a promo?

What do you guys think about this? Also, what do PIF people think about this? Would like to discuss.

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I would take advantage of it why not? I just got a Barclaycard 1 month ago and they gave a promo 0-15 months zero APR for BT purchases bla bla and I transferred 6500 into the card. I have it setup for auto pay where it will be paid off in 12 months. I pay no interest and able to carry a little balance. So yeah I would jump on it in a heartbeat. 

[Imperfectfuture]

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@Anonymous wrote:
Can someone please break down for me how PIF during a 0% promo is throwing away money? Eventually the bill needs to be paid. Whether immediately or later the same amount will be owed and due so what money is being thrown away? Feel like Im missing something.

btw I've done both scenarios. Whatever I'm comfortable with at the time is what happens.

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What LTL means by throwing money away, you can invest the money to make more money, and you can earn interest in higher yield vehicles.  I stash some cash in checking with ,65% interest, and savings at 1% interest.  I can use some of the money towards business expense I am being reimbursed for.  I can invest for 12 months in high yield stock. 

Of course, I do not do all of those things.  I have several 0% cards now.  Amex is paid off, and saving discover for about 300 in purchases February.  I am still building, so can't carry a balance on all of them.