Intro 0% - Float to earn interest in bank account?

[Anonymous]

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@clocktick wrote:

I'd take advantage of the 0% as long as you PIF before it expires.

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Yes but what down sides are there to doing this? The pros are: If I get close to the limit, say within 80% utilization in 6 month and then ride that for the next 9, I would earn about $333 in bank interest. This is compared to if I just PIF every month, to which in that same 15 month period I would earn about $67 of interest. So that's an extra $266 in my pocket.

I'm concerned about these risks, which might outweigh the benefits:

1. I would have a high balance on the card that would always show on the report (only helpful if the card doesn't report the credit line amount as a credit limit, otherwise, wouldn't this look "bad" in some way?).
2. I risk paying a huge amount of interest if I am late with a payment during that 15 months (i.e. if the balance is $9000 and I'm late, the interest just for one month at the non-intro period APR of 21.99% would be $165).
3. @If I miss the deadline to PIF by just one day (or something happens to my funds in the bank, or some emergency comes up), wouldn't the interest be retroactive? So with an average balance of, say $7500, for 15 months @ 21.99% APR = $2061!!! (without calculating compounding, so it would be higher).
4. My FICO scores during the 15 months would be much lower due to high utilization on the card.

Any other potential cons?

[dalebb]

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@Anonymous wrote:

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@clocktick wrote:

I'd take advantage of the 0% as long as you PIF before it expires.

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Yes but what down sides are there to doing this? The pros are: If I get close to the limit, say within 80% utilization in 6 month and then ride that for the next 9, I would earn about $333 in bank interest. This is compared to if I just PIF every month, to which in that same 15 month period I would earn about $67 of interest. So that's an extra $266 in my pocket.

I'm concerned about these risks, which might outweigh the benefits:

1. I would have a high balance on the card that would always show on the report (only helpful if the card doesn't report the credit line amount as a credit limit, otherwise, wouldn't this look "bad" in some way?).
2. I risk paying a huge amount of interest if I am late with a payment during that 15 months (i.e. if the balance is $9000 and I'm late, the interest just for one month at the non-intro period APR of 21.99% would be $165).
3. @If I miss the deadline to PIF by just one day (or something happens to my funds in the bank, or some emergency comes up), wouldn't the interest be retroactive? So with an average balance of, say $7500, for 15 months @ 21.99% APR = $2061!!! (without calculating compounding, so it would be higher).
4. My FICO scores during the 15 months would be much lower due to high utilization on the card.

Any other potential cons?

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sounds like u dont keep a good enough eye on ur account to do it

[LTomBerry]

Depending on which card and which scoring system, your Visa Signature might not report the limit but instead report the highest balance. It would appear to be maxed out unless the scoring system realizes it is not reporting a true limit and categorizes it separately.

My BofA 123 card has a $5000 limit but all that shows up on my report is the highest balance, which is actually this month which is $2700. So right now it looks like that card is at 100% util when it is really at 54%.

Yes I know 54% is high, I plan on paying it off soon, just wanted a big balance to post so down the road the measly hundred bucks a month or so I might use it for doesn't kill the util ratio.

[haulingthescoreup]

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@Anonymous wrote:

@Anonymous, one of my new cards is a Visa Signature (Which may not report a credit limit making it not friendly to my utilization scoring). It also has 15 months @ 0% intro. Would floating all but the minimum payment that entire time have any affect on my credit scoring/report in a negative way? In about 6 months I could get the balance close to my credit line. In the meantime I could be earning 3.5% in my rewards checking account. Should make about $90 in 6 months. After that I could then just pay it off every month and keep the utilization much lower (doubt I'd want to keep floating all that money for the full 15 months, though I could earn another $160 or so doing that).

Any downsides to this approach?

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SIAP (I did look), but there is almost always a balance transfer fee for initiating a BT, even when the APR is 0%, and you have to factor that in as well. The fee is tacked onto however much you transfer over.

Brace for way-rounded-off numbers, but this is a for-instance:

Let's say you have a BT offer of 0% for twelve months, with a BT fee of 4%. You BT over $10,000 to do whatever with it. Even with 0% APR, you are still paying $400 in fees. That's the equivalent of 4% APR. I doubt very seriously that any bank account will match that, much less beat it.

What if the offer is only for six months, same conditions otherwise? Then you BT over $10,000, pay 0% interest, but the $400 in BT fees is the equivalent of 8% APR, because you only get the BT for six months, but you're paying $400 in that six month period.

Work it out on the back of an envelope, accounting for any BT fee, before you go further.

eta: sure enough, I now see that message #8 mentioned the BT fee. So I added the dreary, long Mom-ish lecture on how the fee affects the transaction.

[Anonymous]

^ This.

The only way I would think about doing this is if you did a BT with no transfer fee (i.e. Discover More).

[Anonymous]

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@dalebb wrote:

sounds like u dont keep a good enough eye on ur account to do it

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I don't think I would really have a problem. I use YNAB for budgeting, so I'm keeping track of things quite well. I also would setup automatic payments via my banking bill pay system for the minimum payment and I probably would want to make the PIF payment early so as not to risk it.

I actually have two credit cards I can play the float game with. One for 12 months and the other, as mentioned for 15 months.

My main concerns/questions now are basically:

1. Would having the card's high balance be, well high, be an issue when applying for loans or other credit in the future?
2. Would my FICO score bounce back if quickly going from high utilization to low utilization (after the into period)?
3. Would the issuer not like me running up a high balance? (i.e. lower my credit limit, close the account, etc?)
4. Would I be more or less likely to get an automatic CLI if I PIF every month, or run up a large blance during the Intro period and then PIY?

[haulingthescoreup]

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@Anonymous wrote:

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@dalebb wrote:

sounds like u dont keep a good enough eye on ur account to do it

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I don't think I would really have a problem. I use YNAB for budgeting, so I'm keeping track of things quite well. I also would setup automatic payments via my banking bill pay system for the minimum payment and I probably would want to make the PIF payment early so as not to risk it.

I actually have two credit cards I can play the float game with. One for 12 months and the other, as mentioned for 15 months.

My main concerns/questions now are basically:

1. Would having the card's high balance be, well high, be an issue when applying for loans or other credit in the future?
2. Would my FICO score bounce back if quickly going from high utilization to low utilization (after the into period)?
3. Would the issuer not like me running up a high balance? (i.e. lower my credit limit, close the account, etc?)
4. Would I be more or less likely to get an automatic CLI if I PIF every month, or run up a large blance during the Intro period and then PIY?

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OK, so I assume that you've seen my post about the BT fee, and you've taken that into consideration. So with that out of the way:

1. Yes, in many cases, other lenders will blanch at the high revolving util. You don't want to do this the same time as an app spree,
2. Yes, FICO scoring has no "memory" for what your util was yesterday, or a week ago, or a month ago, or a year ago, When your scores are pulled, they work off of that moment's credit reports and whatever data is on them. If your reported util on that report is 75%, your scores will reflect that. If it's 9%, your scores will reflect that.
3. Generally CCC's who invite and approve BT's don't turn around and punish you for using them. But they'll be watching you like a hawk, so you ought to be super-repsonbile and super-conservative with your credit usage on all accounts during this period. Plus you never know if they'll weird out on you for no reason at all.
4. Varies by lender. Plus this is now talking about something other than a BT, as best as I can tell. Otherwise you wouldn't be speculating about PIF'ing each month.