easy money

[mispoken1]

assuming I open a new credit card with a credit line of 25k at 0% for 12 months. I take a 25k cash advance and put it in a high yield cd. After maturity I will pay back the cash advance and keep the 1000 in interest. How detrimental would this manuever be to my current 775 credit score?

[Anonymous]

#1  You have a credit card with a $25,000 CL that charges a 0% interest rate for maxing out your card to withdraw cash?

#2 You have found a 1 yr CD that pays 4% interest?

#3 What would happen if you used the same $25,000 to buy lottery scratch off tickets?

Honestly..... I think if you bought $25K in DrPepper and recycled the cans when you were finished you might come out better.

I don't think you should borrow money (especially not from a credit card) to invest. And short term investments aren't doing so well right now.

[dilligaf_racing]

Are you sure they will give you a cash advance for the full CL ? Also, what are the Cash advance APR ? I do not think that the 0% introductory APR applies to cash advances. If you Max the card out at 25k , wont you have a monthly payment as well? 

[mispoken1]

yes I can get a 0% cash advance through boa for the full amount. I can also get an apy of 4.25 on a 1 yr cd that is FDIC insured. Not quite the same as the lottery or dr pepper. I will have a monthly payment but at 0% just pay the minimum. Think this would kill my credit score?

[Anonymous]

I thought about what I said and I realize that not only is really negative but it is also really mean and doesn't in ANY way answer your question. So out of fairness I will ATTEMPT to answer your actual question.

What effect would said action have on your credit report....

Well you would take a hit for an inquiry.

You would affect your AAoA by adding in a brand new account and depending on your current AAoA, # of account, other recent accounts opened it could range from ouch to YOWZERS.

You would take a hit as far as Utl and the damage there would also depend on how many accounts you have, how many of them have balances and it also could feel like anything from ouch to YOWZERS.

In all seriousness depending on what your credit reports look like to start with you could be looking at a pretty big hit considering all of the factors.

In addition.... a $25,000 credit card charge can carry a pretty hefty monthly minimum payment regardless of fees or interest.... and I'm going to go ahead and assume that if $1000 seems like a large enough sum of money to make you interested in doing this then.... you probably CAN NOT afford said monthly payments so the 0% interest rate is going to last about 30 days and will then jump to about 29%... which you definitely will not be able to afford so you will also have late payments (with fees AND damage to your credit score) and you will eventually get a CO and if you are lucky your account will only be sold to 3 or 4 CA at time.

So in a year we are looking at an estimated score drop of about .... ummmm ALOT!

Do you really need that $1000 THAT bad!

[dilligaf_racing]

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@mispoken1 wrote:
yes I can get a 0% cash advance through boa for the full amount. I can also get an apy of 4.25 on a 1 yr cd that is FDIC insured. Not quite the same as the lottery or dr pepper. I will have a monthly payment but at 0% just pay the minimum. Think this would kill my credit score?

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You will take a hit for an Inquiry. Your Util on that account will be 100% which will cause a big hit. Your AAOA will most likely now change and that will cause a drop also. How much is the monthly payment going to be on $25,000 ???

[dilligaf_racing]

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@Anonymous wrote:

I thought about what I said and I realize that not only is really negative but it is also really mean and doesn't in ANY way answer your question. So out of fairness I will ATTEMPT to answer your actual question.

What effect would said action have on your credit report....

Well you would take a hit for an inquiry.

You would affect your AAoA by adding in a brand new account and depending on your current AAoA, # of account, other recent accounts opened it could range from ouch to YOWZERS.

You would take a hit as far as Utl and the damage there would also depend on how many accounts you have, how many of them have balances and it also could feel like anything from ouch to YOWZERS.

In all seriousness depending on what your credit reports look like to start with you could be looking at a pretty big hit considering all of the factors.

In addition.... a $25,000 credit card charge can carry a pretty hefty monthly minimum payment regardless of fees or interest.... and I'm going to go ahead and assume that if $1000 seems like a large enough sum of money to make you interested in doing this then.... you probably CAN NOT afford said monthly payments so the 0% interest rate is going to last about 30 days and will then jump to about 29%... which you definitely will not be able to afford so you will also have late payments (with fees AND damage to your credit score) and you will eventually get a CO and if you are lucky your account will only be sold to 3 or 4 CA at time.

So in a year we are looking at an estimated score drop of about .... ummmm ALOT!

Do you really need that $1000 THAT bad!

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You took the words right out of my mouth AmyBoo 

Message Edited by dilligaf_racing on 10-10-2008 10:11 PM

[Anonymous]

About $3500 a month if it is 15% of the balance which is what most of mine average....

[mispoken1]

Thanks for the reply. While your post (amy) contains a lot of (wrong) assumptions about my personal situation you certainly were helpful in letting me know what exactly this may affect in my score. Thank you.

[Anonymous]

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@mispoken1 wrote:
assuming I open a new credit card with a credit line of 25k at 0% for 12 months. I take a 25k cash advance and put it in a high yield cd. After maturity I will pay back the cash advance and keep the 1000 in interest. How detrimental would this manuever be to my current 775 credit score?

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Don't forget the 3% transaction fee for the cash advance at 0%. Rarely will you find a 0% transaction fee. Sometimes they cap it at $75-$150 and sometimes it's just 3% with no cap. Kinda takes the fun out of it to pay 3% up front before you even get the check right?

Otherwise you can do it. Be careful BOA likes to do CLDs after you PIF after something like that. Otherwise the banks know people will do this. Their fine with it because lots of people mess up with being late just once and WHAM sometimes 27% int (even higher) or miss the confusing promo time limit and WHAM again loose the 0% apr when it expires.

But yes you can make about $900 over 12 months with $25k CL. The bank is gambling that you will mess up. If you mess up they make $600 on just the first month of interest. Then when people find that they owe so much interest they can't pay it back so fast. The interest keeps the debt going and the banks reals in a fortune that makes up for all the other people that don't mess up.

Just be careful. Your logic is correct. You also have to pay income tax on the interest you earn. Those 1099-INT statements for your CDs are reported to the IRS by the banks. There goes another 25% of your total interest earnings. lol Pretty hard to make money at the BT game right? Some people do it and get a few bucks. It's a lot easier to make a few hundred than a few thousand. Some people apply, take the promos, ride them in CDs or the Stock Market, PIF close the card, apply for a new one and start the process all over. It never ends and keeps going one after another like a second income. Credit score will always be lower from inqs, new accounts and a lower avg age. But it can work.