topic Re: About using 0% apr in Credit Cards

About using 0% apr

Anonymous — Fri, 13 May 2016 18:29:54 GMT

Hi everyone,

It has been 2.5 years since my credit journey started. Thanks to this forums , my credit is in very good health. Currently , I have 3 credit cards which give me 0% apr for a year. Since I pay all the balances full, I have never used this feature.

1. Is it a good idea to pay the minimum balances on 0% intro apr cards and save the money in savings accounts(1% interest )/bonds ? (My total CL is around ~140k so , I am sure my purchases will never cross 20k keeping my util rate <20%)

2. My current scores are aroung 760-775 range. will the above strategy affect my credit scores significantly?

P.S I know credit card debt is bad, but i will always have cash to clear it.

Re: About using 0% apr

Anonymous — Fri, 13 May 2016 18:44:12 GMT

May as well take advantage of the 0% APR period if you don't plan on getting another card, loan, or mortgage.

From what I've read, utilization has no history; if your score is X at Y utilization, then your score will rebound to X once you reach Y utilization again, holding all else equal.

Just make sure you're able to repay towards to end of the 0% period so you don't accrue interest.

Re: About using 0% apr

Anonymous — Fri, 13 May 2016 18:53:11 GMT

If you only make minimum payments for the duration of the 0% offer, your utilization will increase which will likely drive your scores down a bit. But if you keep track of things well, you can make some extra money as you describe. That's essentially what banks do with the money we deposit.

Re: About using 0% apr

dragontears — Fri, 13 May 2016 19:30:59 GMT

my first thought is what card companies are you looking to do this with? not all lenders view carrying a balance the same especially when you are new to them. For example there have been more then one reported case of Amex shutting people down because they were taking advantage of a 0% intro period and only making minimum payments.

Re: About using 0% apr

Anonymous — Fri, 13 May 2016 19:47:38 GMT

I'd say always pay SOMETHING over the minimum. Whether that's $5 over or 2x or whatever. I don't know how the algorithms work at the lenders, but I figure if there's a box to check that I paid more than the minimum and one that I paid the minimum...I want to have the first one checked.

Re: About using 0% apr

Anonymous — Fri, 13 May 2016 19:57:26 GMT

@dragontears wrote:
my first thought is what card companies are you looking to do this with? not all lenders view carrying a balance the same especially when you are new to them. For example there have been more then one reported case of Amex shutting people down because they were taking advantage of a 0% intro period and only making minimum payments.

amex everyday , chase AARP , bofa BBR,

barclays ventureone. I was planning to use chase AARP for all purchases.

Re: About using 0% apr

SouthJamaica — Fri, 13 May 2016 20:01:46 GMT

@Anonymous wrote:
Hi everyone,
It has been 2.5 years since my credit journey started. Thanks to this forums , my credit is in very good health. Currently , I have 3 credit cards which give me 0% apr for a year. Since I pay all the balances full, I have never used this feature.
~
1. Is it a good idea to pay the minimum balances on 0% intro apr cards and save the money in savings accounts(1% interest )/bonds ? (My total CL is around ~140k so , I am sure my purchases will never cross 20k keeping my util rate <20%)
2. My current scores are aroung 760-775 range. will the above strategy affect my credit scores significantly?

P.S I know credit card debt is bad, but i will always have cash to clear it.

I don't think it's a good idea.

It will hurt your scores, and paying of minimal monthly payments could lead to adverse action, thus reducing your credit limits and hurting your scores even more.

I would not mess around with the idea of trying to make money off of banks; you can't outsmart banks, because they own the football. If there was any way for you to beat them at this game, they would have taken that football home long ago.

Re: About using 0% apr

SouthJamaica — Fri, 13 May 2016 20:04:07 GMT

@Anonymous wrote:

@dragontears wrote:
my first thought is what card companies are you looking to do this with? not all lenders view carrying a balance the same especially when you are new to them. For example there have been more then one reported case of Amex shutting people down because they were taking advantage of a 0% intro period and only making minimum payments.

amex everyday , chase AARP , bofa BBR,
barclays ventureone. I was planning to use chase AARP for all purchases.

4 out of 5 of those banks would not hesitate to take adverse action against you.

Do not, repeat do not, mess with these banks.

Re: About using 0% apr

Closingracer99 — Fri, 13 May 2016 20:26:58 GMT

@Anonymous wrote:
If you only make minimum payments for the duration of the 0% offer, your utilization will increase which will likely drive your scores down a bit. But if you keep track of things well, you can make some extra money as you describe. That's essentially what banks do with the money we deposit.

Your utilization can't rise if you're taking advantage of a 0% APR if you're only paying the min.... Since there is no interest and you're paying down the debt your Util will go down not up....

Re: About using 0% apr

Closingracer99 — Fri, 13 May 2016 20:29:19 GMT

@SouthJamaica wrote:
@Anonymous wrote:
Hi everyone,
It has been 2.5 years since my credit journey started. Thanks to this forums , my credit is in very good health. Currently , I have 3 credit cards which give me 0% apr for a year. Since I pay all the balances full, I have never used this feature.
~
1. Is it a good idea to pay the minimum balances on 0% intro apr cards and save the money in savings accounts(1% interest )/bonds ? (My total CL is around ~140k so , I am sure my purchases will never cross 20k keeping my util rate <20%)
2. My current scores are aroung 760-775 range. will the above strategy affect my credit scores significantly?

P.S I know credit card debt is bad, but i will always have cash to clear it.

I don't think it's a good idea.

It will hurt your scores, and paying of minimal monthly payments could lead to adverse action, thus reducing your credit limits and hurting your scores even more.

I would not mess around with the idea of trying to make money off of banks; you can't outsmart banks, because they own the football. If there was any way for you to beat them at this game, they would have taken that football home long ago.

I have paid the min a few times with the intention of paying it all off at the end of the 0% APR. You'll be fine paying the Min on a 0% APR imo but make sure you do pay it off before it ends. I also would throw in some $100 payments or higher at least.

Re: About using 0% apr

Anonymous — Fri, 13 May 2016 21:08:44 GMT

@Closingracer99 wrote:
@Anonymous wrote:
If you only make minimum payments for the duration of the 0% offer, your utilization will increase which will likely drive your scores down a bit. But if you keep track of things well, you can make some extra money as you describe. That's essentially what banks do with the money we deposit.
Your utilization can't rise if you're taking advantage of a 0% APR if you're only paying the min.... Since there is no interest and you're paying down the debt your Util will go down not up....

You must be presuming he's going to charge all $20k in the first month and then pay it off over the life of the 0% APR. From what the OP said, he plans to just use the card for purchases every month, slowly building up to as much as $20k before the end of the period. Thus, his utilization will increase over time, not decrease.

I did this very thing when I signed up for the Discover it Miles card last year. Kept putting most everthing on it and paying the minimum each month. Got a comple of CLI's along the way when I approached (or exceeded) the C/L. I saw no adverse action, but I did see my score drop from around 840 to around 760. Finally paid it off last month, and my scores bounced right back.

Chris.

Re: About using 0% apr

Anonymous — Fri, 13 May 2016 21:23:57 GMT

@Anonymous wrote:
@Closingracer99 wrote:
@Anonymous wrote:
If you only make minimum payments for the duration of the 0% offer, your utilization will increase which will likely drive your scores down a bit. But if you keep track of things well, you can make some extra money as you describe. That's essentially what banks do with the money we deposit.
Your utilization can't rise if you're taking advantage of a 0% APR if you're only paying the min.... Since there is no interest and you're paying down the debt your Util will go down not up....
You must be presuming he's going to charge all $20k in the first month and then pay it off over the life of the 0% APR. From what the OP said, he plans to just use the card for purchases every month, slowly building up to as much as $20k before the end of the period. Thus, his utilization will increase over time, not decrease.

I did this very thing when I signed up for the Discover it Miles card last year. Kept putting most everthing on it and paying the minimum each month. Got a comple of CLI's along the way when I approached (or exceeded) the C/L. I saw no adverse action, but I did see my score drop from around 840 to around 760. Finally paid it off last month, and my scores bounced right back.

Chris.

Yes , that's the plan. Did your score bounced back to 840 again ?

Re: About using 0% apr

Anonymous — Fri, 13 May 2016 21:31:18 GMT

@Anonymous wrote:
@Anonymous wrote:
@Closingracer99 wrote:
@Anonymous wrote:
If you only make minimum payments for the duration of the 0% offer, your utilization will increase which will likely drive your scores down a bit. But if you keep track of things well, you can make some extra money as you describe. That's essentially what banks do with the money we deposit.
Your utilization can't rise if you're taking advantage of a 0% APR if you're only paying the min.... Since there is no interest and you're paying down the debt your Util will go down not up....
You must be presuming he's going to charge all $20k in the first month and then pay it off over the life of the 0% APR. From what the OP said, he plans to just use the card for purchases every month, slowly building up to as much as $20k before the end of the period. Thus, his utilization will increase over time, not decrease.

I did this very thing when I signed up for the Discover it Miles card last year. Kept putting most everthing on it and paying the minimum each month. Got a comple of CLI's along the way when I approached (or exceeded) the C/L. I saw no adverse action, but I did see my score drop from around 840 to around 760. Finally paid it off last month, and my scores bounced right back.

Chris.
Yes , that's the plan. Did your score bounced back to 840 again ?

Ish. Certainly over 800, but more like 820. I saw a few more cards to apply for and couldn't resist, which has driven up my inquiries and down my AAOA. But what's the use of a 800+ credit score if you're not going to exploit it?

Chris.

Re: About using 0% apr

Anonymous — Sat, 14 May 2016 00:13:00 GMT

No, I wouln't.

You have a great group of cards that you probably plan to keep for a long while excluding a few probably. Remember your profile is relatively young. Also take into consideration that util is more than 'overall'. Lenders seeing you use 50+ % util on one particular card (or any other high %) might lead to AA. Also nominal overall debt plays a factor. When I see AA threads and people screaming 'my util was only 10% or was less than 30% etc) but remember if you're $10,000 in debt you're $10,000 in debt. That's a significant amount of money, no matter what your available credit is. Without special knowledge to the contrary that says that your income is not sufficient to meet your spending pattern and you've borrowed $10,000. What are the chances you're able to right the ship and pay all of that back? Decent probablby, given your scores and history.. but still risky enough for them to notice.

Now if the interest rate was 10% in savings I would say ya to hell with any AA go ahead and do it. But in this case I think the ongoing positive relationships with these banks and your revolving credit lines is more valuable than 1% interest in a savings account. I mean if you want to revolve a few thousand on one of the cards while still making 10+% of the balance payments every month sure go ahead and do it. But aggressively loading up balances on these cards and min paying until the last minute then PIF? Not worth it. Set them up for the long con and burn them for 150k down the line in a BK (just kidding)