topic Re: Balance Transfers, big purchase then flipping it to a new card? in Credit Cards

Balance Transfers, big purchase then flipping it to a new card?

Anonymous — Sat, 21 Apr 2018 02:54:11 GMT

Background

Current income - $37,000 (changing to $65,000 in July)

Credit Score - 845

Debt - $0 (I have some student loans that total under $120. I have paid them down to that level and they are not due until 2023. I've been letting them sit to increase credit length.)

Credit Cards - 3 (all paid in full each month)

Savings - $35,000

Credit limit - $45,000 total among the 3

I've been having issues with my current motorcycle and was thinking of getting a new one to hold me over. The new one would be something relatively inexpensive in the $3-5K range. Eventually, I'd gift it to my youngest brother in a year or two. Looking into things, I was surprised by how much higher in % loans were for motorcycles vs cars.

I received a flyer in the mail for a NFCU card with 0% APR for 12 (might have been 15, can't find it at the moment) months, and no balance transfer fees. I am already a member, I do not have a CC with them currently. I'm not sure I entirely understand balance transfers, and was looking for guidance.

The biggest question, could I purchase a motorcycle by using one of my credit cards, and then transfer that balance to the NFCU card; and then pay monthly before the time expires? Rather than paying for it all up front, could I use this option to pay for it over a year rather than applying for a loan?

Is this one of those technically correct, but real world dumb type things?

Are there any hidden consequences to doing this?

If I do a BT, how do they pay off your other card? Do they mail you a check and then charge you that amount on their card? Do they directly go through the other lender and discuss it? Can they turn down a balance transfer?

Thank you in advance!

Re: Balance Transfers, big purchase then flipping it to a new card?

NRB525 — Sat, 21 Apr 2018 03:41:02 GMT

Basically, yes, this is doable and not underhanded.

One key key point will be whether the motorcycle dealer will want to charge extra to use a credit card. Depending on the rewards, and because you intend to use a $0 fee, 0% APR BT, the extra fee may still be acceptable to you.

The card you charge the purchase will typically have a grace period, depending how soon the statement prints after your purchase, until the payment is due. That is your window to most easily complete the BT.

NFCU will need to approve you for the card if you don’t already have it, and the BT offers like that often have an expiration date, you must initiate the BT request before that expiry.

You request the BT and usually tell the bank which CC number and bank you want to pay off. Sometimes you can get a check to checking. I just did a BT through Discover, to checking, and they used the same checking account my auto-pay is on, did not ask me to input the account, and the funds were pending in my checking the next day.

Having gone through all that explanation, there are subtle differences how each BT will work. If you have never done any BT, read the fine print and methodically go through the steps. I recommend anyone who thinks they might ever want to do a Balance Transfer should go through a very small one first, say $200, just to go through the process. I can try to describe here, but nothing teaches as well as personal experience and a fee for a $200 BT is a good education investment.

Re: Balance Transfers, big purchase then flipping it to a new card?

Anonymous — Sat, 21 Apr 2018 08:39:20 GMT

Interest rates shouldn't be drastically far off with a motorcycle, especially with your nearly perfect credit score. My bike loan is 3.4%, which isn't horrible and would basically amount to pittance if it was on a sub $5k bike.

With that being said, you're going to have a harder time finding a dealership that is willing to let you pay with a credit card. The transaction fee will most likely wipe out most all of their profit, especially on a bike at that price point.

Re: Balance Transfers, big purchase then flipping it to a new card?

Anonymous — Sat, 21 Apr 2018 10:20:07 GMT

I’ll also chime in and say, for some balance transfers banks will offer balance transfer checks where you can pay whatever you want with it. I haven’t seen Navy do this, yet they propably due and I’m just unaware of it. If your hard pressed to find a dealership to allow to pay with a CC, then using this method would allow you to take advantage of the balance transfer offer from Navy. Now you of course have to apply for the CC first, which probably goes without saying, but I would call up Navy first a see if they do give out balance transfer checks. Their CSRs are always friendly and helpful.

Re: Balance Transfers, big purchase then flipping it to a new card?

digitek — Sat, 21 Apr 2018 11:41:35 GMT

I must be missing something here. You're in excellent financial shape from what you've written. I can't see a reason why you wouldn't just buy the bike out right in cash. Why bother with this strange 0% BT stuff?

Re: Balance Transfers, big purchase then flipping it to a new card?

NRB525 — Sat, 21 Apr 2018 11:48:50 GMT

@digitek wrote:
I must be missing something here. You're in excellent financial shape from what you've written. I can't see a reason why you wouldn't just buy the bike out right in cash. Why bother with this strange 0% BT stuff?

Credit is a financial tool. When a bank offers no fee to make a loan, and no interest charges for a year, that is a free tool you can utilize.

Sure, OP could probably pay with cash, but using this loan puts a balance on a card, and reflects in monthly payment experience over the 12 months. As a way to continue building a strong credit profile, with no interest cost, it has value as a strategy.

Re: Balance Transfers, big purchase then flipping it to a new card?

Gmood1 — Sat, 21 Apr 2018 12:02:51 GMT

@NRB525 wrote:
@digitek wrote:
I must be missing something here. You're in excellent financial shape from what you've written. I can't see a reason why you wouldn't just buy the bike out right in cash. Why bother with this strange 0% BT stuff?
Credit is a financial tool. When a bank offers no fee to make a loan, and no interest charges for a year, that is a free tool you can utilize.

Sure, OP could probably pay with cash, but using this loan puts a balance on a card, and reflects in monthly payment experience over the 12 months. As a way to continue building a strong credit profile, with no interest cost, it has value as a strategy.

+1000

This is what the average consumer doesn't understand. This is exactly how you use credit as a tool and to your advantage! Use the banks money instead of your own. Make those CCs work for you, not the other way around.

Bravo NRB, on the excellent post!😀

Re: Balance Transfers, big purchase then flipping it to a new card?

AverageJoesCredit — Sat, 21 Apr 2018 12:17:33 GMT

We Run Things Things No Run We

Re: Balance Transfers, big purchase then flipping it to a new card?

digitek — Sat, 21 Apr 2018 12:37:58 GMT

@NRB525 wrote:
@digitek wrote:
I must be missing something here. You're in excellent financial shape from what you've written. I can't see a reason why you wouldn't just buy the bike out right in cash. Why bother with this strange 0% BT stuff?
Credit is a financial tool. When a bank offers no fee to make a loan, and no interest charges for a year, that is a free tool you can utilize.

Sure, OP could probably pay with cash, but using this loan puts a balance on a card, and reflects in monthly payment experience over the 12 months. As a way to continue building a strong credit profile, with no interest cost, it has value as a strategy.

Let's get something straight right away, you are stretching this right here. The advantage to putting this motorcycle on a 0% BT card over paying in cash is that it would give him 12 months of positive credit history on a card? He can do that without putting a single dollar on a 0% BT card or actually borrowing a single penny.

There is a reason banks give out 0% BT offers to pretty much anyone who will take one, it is an obvious trap that they hope you fall into.

The only real and tangible benefit I could see to doing this is that it would allow him to keep his money for 12 months instead of using the banks. If that money was invested in something with a guaranteed return over 3% then he would be making whatever the difference is over that 3%, because inflation is about 3% so after a year he ends up buying power neutral.

Still not sure why he wouldn't use the money he saved up for and has in his hand, and instead get a loan from a bank which carries all kinds of risk and contracts and goofy stuff.

I am sorry, but the benefit I see to doing this is almost completely negligible or fabricated, only reason I can see to actually do this is if it is some kind of risky deal and there is a chance you'd default and the bank would eat the loan instead of you, because the 0% BT thing is really just transferring risk to the bank, but they'll want their money back in one way or another...

Re: Balance Transfers, big purchase then flipping it to a new card?

Meanmchine — Sat, 21 Apr 2018 12:41:10 GMT

Arent you getting 0% offers in the mail?

Re: Balance Transfers, big purchase then flipping it to a new card?

MrDisco99 — Sat, 21 Apr 2018 12:49:58 GMT

Because if his savings is earning interest and his debt on the motorcycle is not, he comes out ahead vs. paying up front.

Re: Balance Transfers, big purchase then flipping it to a new card?

Anonymous — Sat, 21 Apr 2018 14:50:14 GMT

@digitek wrote:
@NRB525 wrote:
@digitek wrote:
I must be missing something here. You're in excellent financial shape from what you've written. I can't see a reason why you wouldn't just buy the bike out right in cash. Why bother with this strange 0% BT stuff?
Credit is a financial tool. When a bank offers no fee to make a loan, and no interest charges for a year, that is a free tool you can utilize.

Sure, OP could probably pay with cash, but using this loan puts a balance on a card, and reflects in monthly payment experience over the 12 months. As a way to continue building a strong credit profile, with no interest cost, it has value as a strategy.
Let's get something straight right away, you are stretching this right here. The advantage to putting this motorcycle on a 0% BT card over paying in cash is that it would give him 12 months of positive credit history on a card? He can do that without putting a single dollar on a 0% BT card or actually borrowing a single penny.

There is a reason banks give out 0% BT offers to pretty much anyone who will take one, it is an obvious trap that they hope you fall into.

The only real and tangible benefit I could see to doing this is that it would allow him to keep his money for 12 months instead of using the banks. If that money was invested in something with a guaranteed return over 3% then he would be making whatever the difference is over that 3%, because inflation is about 3% so after a year he ends up buying power neutral.

Still not sure why he wouldn't use the money he saved up for and has in his hand, and instead get a loan from a bank which carries all kinds of risk and contracts and goofy stuff.

I am sorry, but the benefit I see to doing this is almost completely negligible or fabricated, only reason I can see to actually do this is if it is some kind of risky deal and there is a chance you'd default and the bank would eat the loan instead of you, because the 0% BT thing is really just transferring risk to the bank, but they'll want their money back in one way or another...

Definitely not fabricated, negligible is going to be dependent on the individuals personal circumstances. I ran numbers through a generic calculator and found that by using a 0% interest free year on a $5k bike a person will save $92.56 compared to my 3.4% loan. If that $5k is real and is deposited into a high-yield savings account at 1.45% then he would see another $72.98 in interest. Combined, that's a total of $165.54 by simply making different money decisions, and those numbers can swing pretty wildly in either direction out in the real world.

I personally like free money and whenever there is a zero percent rate I try to take advantage of it if the math supports it. It doesn't always make me a millionaire but if it buys a few tanks of fuel or a nice dinner then I consider it a win.

Re: Balance Transfers, big purchase then flipping it to a new card?

Anonymous — Sat, 21 Apr 2018 15:50:42 GMT

@Anonymous wrote:
Interest rates shouldn't be drastically far off with a motorcycle, especially with your nearly perfect credit score. My bike loan is 3.4%, which isn't horrible and would basically amount to pittance if it was on a sub $5k bike.

With that being said, you're going to have a harder time finding a dealership that is willing to let you pay with a credit card. The transaction fee will most likely wipe out most all of their profit, especially on a bike at that price point.

While small, why pay it?

To your second point, I wasn't aware that most dealerships wouldn't take a card. That is a valid point I hadn't thought of. The transaction fee would be on their end though, not mine, correct?

Re: Balance Transfers, big purchase then flipping it to a new card?

Anonymous — Sat, 21 Apr 2018 16:06:39 GMT

@Meanmchine wrote:
Arent you getting 0% offers in the mail?

I'm confused. I am getting 0% offer in mail. I found the flier with the link:

Low Rates and Cash Back = Win-Win

You're pre-selected to get a 0% intro APR on balance transfers for 12 months when you transfer your credit card balance to a new Navy Federal cashRewards card before April 30, 2018. After that, a variable APR between 10.9% and 18% applies.1 PLUS, earn $150 cash back after you spend $3,000 in the first 90 days.

2You'll also enjoy:

1.5% cash back on purchases3
No annual fees1
No balance transfer fees1
No foreign transaction fees1

Re: Balance Transfers, big purchase then flipping it to a new card?

Anonymous — Sat, 21 Apr 2018 16:09:41 GMT

@Anonymous wrote:
@digitek wrote:
@NRB525 wrote:
@digitek wrote:
I must be missing something here. You're in excellent financial shape from what you've written. I can't see a reason why you wouldn't just buy the bike out right in cash. Why bother with this strange 0% BT stuff?
Credit is a financial tool. When a bank offers no fee to make a loan, and no interest charges for a year, that is a free tool you can utilize.

Sure, OP could probably pay with cash, but using this loan puts a balance on a card, and reflects in monthly payment experience over the 12 months. As a way to continue building a strong credit profile, with no interest cost, it has value as a strategy.
Let's get something straight right away, you are stretching this right here. The advantage to putting this motorcycle on a 0% BT card over paying in cash is that it would give him 12 months of positive credit history on a card? He can do that without putting a single dollar on a 0% BT card or actually borrowing a single penny.

There is a reason banks give out 0% BT offers to pretty much anyone who will take one, it is an obvious trap that they hope you fall into.

The only real and tangible benefit I could see to doing this is that it would allow him to keep his money for 12 months instead of using the banks. If that money was invested in something with a guaranteed return over 3% then he would be making whatever the difference is over that 3%, because inflation is about 3% so after a year he ends up buying power neutral.

Still not sure why he wouldn't use the money he saved up for and has in his hand, and instead get a loan from a bank which carries all kinds of risk and contracts and goofy stuff.

I am sorry, but the benefit I see to doing this is almost completely negligible or fabricated, only reason I can see to actually do this is if it is some kind of risky deal and there is a chance you'd default and the bank would eat the loan instead of you, because the 0% BT thing is really just transferring risk to the bank, but they'll want their money back in one way or another...
Definitely not fabricated, negligible is going to be dependent on the individuals personal circumstances. I ran numbers through a generic calculator and found that by using a 0% interest free year on a $5k bike a person will save $92.56 compared to my 3.4% loan. If that $5k is real and is deposited into a high-yield savings account at 1.45% then he would see another $72.98 in interest. Combined, that's a total of $165.54 by simply making different money decisions, and those numbers can swing pretty wildly in either direction out in the real world.

I personally like free money and whenever there is a zero percent rate I try to take advantage of it if the math supports it. It doesn't always make me a millionaire but if it buys a few tanks of fuel or a nice dinner then I consider it a win.

Exactly! I'd also earn 2% on the purchase with the original CC. Now I'm curious; would a BT count as spending on the new card (for the purposes of a sign up bonus)?

Re: Balance Transfers, big purchase then flipping it to a new card?

Anonymous — Sat, 21 Apr 2018 16:21:04 GMT

@Anonymous wrote:
@Meanmchine wrote:
Arent you getting 0% offers in the mail?
I'm confused. I am getting 0% offer in mail. I found the flier with the link:

Low Rates and Cash Back = Win-Win
You're pre-selected to get a 0% intro APR on balance transfers for 12 months when you transfer your credit card balance to a new Navy Federal cashRewards card before April 30, 2018. After that, a variable APR between 10.9% and 18% applies.1 PLUS, earn $150 cash back after you spend $3,000 in the first 90 days.
2You'll also enjoy:
1.5% cash back on purchases3
No annual fees1
No balance transfer fees1
No foreign transaction fees1

BT won't count as purchase AND the 0% doesn't read that it's for purchases and for BT, so you may have to give up the SUB, depending on what else you have going on. If you have $3000 in expenses to run thru the card quickly and pay off, then you could do that and THEN do the BT. Or maybe you should, assuming the dealership won't charge a fee (they could charge you a few % points on top of the price for the cost to them of you using the card...or they may say you can charge $1000 but they'd charge on top of that or something), you could charge the bike to make the sign up bonus and get 1.5% then just pay it.

If you decide to go the BT route, as others have said different lenders on each end work differently. Some are all electronic and take a couple days. Some send paper checks and take 10+ days. I'm thinking with that 4/30 cut off, you don't have any spare time to think about this. It's today or a different plan.

Re: Balance Transfers, big purchase then flipping it to a new card?

digitek — Sat, 21 Apr 2018 16:37:33 GMT

@Anonymous wrote:
@Anonymous wrote:
@digitek wrote:
@NRB525 wrote:
@digitek wrote:
I must be missing something here. You're in excellent financial shape from what you've written. I can't see a reason why you wouldn't just buy the bike out right in cash. Why bother with this strange 0% BT stuff?
Credit is a financial tool. When a bank offers no fee to make a loan, and no interest charges for a year, that is a free tool you can utilize.

Sure, OP could probably pay with cash, but using this loan puts a balance on a card, and reflects in monthly payment experience over the 12 months. As a way to continue building a strong credit profile, with no interest cost, it has value as a strategy.
Let's get something straight right away, you are stretching this right here. The advantage to putting this motorcycle on a 0% BT card over paying in cash is that it would give him 12 months of positive credit history on a card? He can do that without putting a single dollar on a 0% BT card or actually borrowing a single penny.

There is a reason banks give out 0% BT offers to pretty much anyone who will take one, it is an obvious trap that they hope you fall into.

The only real and tangible benefit I could see to doing this is that it would allow him to keep his money for 12 months instead of using the banks. If that money was invested in something with a guaranteed return over 3% then he would be making whatever the difference is over that 3%, because inflation is about 3% so after a year he ends up buying power neutral.

Still not sure why he wouldn't use the money he saved up for and has in his hand, and instead get a loan from a bank which carries all kinds of risk and contracts and goofy stuff.

I am sorry, but the benefit I see to doing this is almost completely negligible or fabricated, only reason I can see to actually do this is if it is some kind of risky deal and there is a chance you'd default and the bank would eat the loan instead of you, because the 0% BT thing is really just transferring risk to the bank, but they'll want their money back in one way or another...
Definitely not fabricated, negligible is going to be dependent on the individuals personal circumstances. I ran numbers through a generic calculator and found that by using a 0% interest free year on a $5k bike a person will save $92.56 compared to my 3.4% loan. If that $5k is real and is deposited into a high-yield savings account at 1.45% then he would see another $72.98 in interest. Combined, that's a total of $165.54 by simply making different money decisions, and those numbers can swing pretty wildly in either direction out in the real world.

I personally like free money and whenever there is a zero percent rate I try to take advantage of it if the math supports it. It doesn't always make me a millionaire but if it buys a few tanks of fuel or a nice dinner then I consider it a win.

Exactly! I'd also earn 2% on the purchase with the original CC. Now I'm curious; would a BT count as spending on the new card (for the purposes of a sign up bonus)?

I appreciate a good math session, but I think you're off again. First, you are not getting 3.4% loan, you are paying cash in hand so you are not saving any money at all by getting a 0% BT for 12 months, you aren't paying interest on any loan at all. Second, you are right, a high yield savings account is about 1.45% at most, but you are forgetting that inflation is roughly 2% a year so you are actually LOSING out on about .5% of actual purchasing power by the end of that 12 months (no kidding your money is worth 2% less every 12 months due to inflation).

Also, yeah you can get 2% cash back if the card offers it, but like it has been mentioned several times, there are some places that will not accept credit cards, or if they do they will charge you the rate that the payment network/cc charges them. A motorcycle dealership is likely one of those places that will make you eat the cost of that CC transaction, they don't calculate into the asking price like everywhere else because they just don't accept them.

Do what you want, but I am just pointing out that this forum is a little bit obsessed with credit. I see no reason to risk borrowing money from a bank for this.

Going by the logic here, I should put everything on a 0% BT card? Why stop at a motorcycle? It's an interest free year long loan, right? I should do this for all my expenses and purchases?

Re: Balance Transfers, big purchase then flipping it to a new card?

Kforce — Sat, 21 Apr 2018 17:42:52 GMT

@Anonymous wrote:
To your second point, I wasn't aware that most dealerships wouldn't take a card. That is a valid point I hadn't thought of. The transaction fee would be on their end though, not mine, correct?

It cost the merchant between 2% and 2.5% as an average to take a CC payment. This means it will be an extra fee or you will have a higher quote on the bike than if you had cash or a pre-approved loan in hand. Your 2% back is not real, cancelled by a higher price day 1. The dealer will not be on the loosing end of the transaction. Yes you can borrow the money for a year at 0 and gain 45$ interest earned in your savings. Which is taxable and you get to keep $40. I would not bother. Bet I could save more than $40 with cash in hand at the dealer.

Re: Balance Transfers, big purchase then flipping it to a new card?

Anonymous — Sat, 21 Apr 2018 18:18:14 GMT

@Kforce wrote:
@Anonymous wrote:
To your second point, I wasn't aware that most dealerships wouldn't take a card. That is a valid point I hadn't thought of. The transaction fee would be on their end though, not mine, correct?
It cost the merchant between 2% and 2.5% as an average to take a CC payment. This means it will be an extra fee or you will have a higher quote on the bike than if you had cash or a pre-approved loan in hand. Your 2% back is not real, cancelled by a higher price day 1. The dealer will not be on the loosing end of the transaction. Yes you can borrow the money for a year at 0 and gain 45$ interest earned in your savings. Which is taxable and you get to keep $40. I would not bother. Bet I could save more than $40 with cash in hand at the dealer.

I'm curious, why should I tell the dealer I am paying in cash? Shouldn't I work out the price as best I can and then hammer out how to pay? If I said I was paying in cash, wouldn't they think I was ready to pay that day, and not as willing to lower the price?

Re: Balance Transfers, big purchase then flipping it to a new card?

Kforce — Sat, 21 Apr 2018 19:34:10 GMT

@Anonymous wrote:

I'm curious, why should I tell the dealer I am paying in cash? Shouldn't I work out the price as best I can and then hammer out how to pay? If I said I was paying in cash, wouldn't they think I was ready to pay that day, and not as willing to lower the price?

During the price negotiations phase, they will ask how you are buying it and price it accordingly. (You will not get the lowest price quote with them being in the dark). Many car dealers will only take a small deposit with a CC. Dealers will usually give a better price for those that can pay without strings, getting loans, or using CC's. If it was an expensive car and you were financing through the dealership, they might give you a good price, planning on making it up on the financing. If buying with a CC they will charge you 2-3% more than a cash price. If you can get the balance transfer to your checking, you win. (interest and price), or the most you can win is (interest). My bet would be thay you can save more than the interest on negotiations with cash.