With all the talk of leasing vs. buying, something else came to mind. The other day I got some of those "convenience checks" for my VISA card. I never use this particular card, preferring to use my Amex, so it has no balance and a $24,000 credit limit.

One of the checks is 3.9% annual APR, until the amount is paid off. Suddenly, I thought, why not buy my upcoming MCS with one of these checks? I realize there's a gotcha: that if you're late on a payment, it automatically jumps to some ridiculous double-digit rate, but assuming that doesn't happen, what's the downside? Is it that CC interest is compounded?

 

Buy it on whatever, and use the balance transfer featurs.... I've gotten offers for 0.9% until the balance transfer was paid off, you have to have discipline, but it's a great way to skim off some interest.

Matt

 

No downside, it will work, just don't be late on a payment and don't pay the minimum! Calculate a repayment of say 3 years, and pay that amount + interest and you will be all set.

 

just watch out for cash advance fees. sometimes those checks are considered the same as a cash advance and some banks charge a percentage of the purchase (which adds to the apr). some of them have a maximum charge of $50 too which would still be a great deal.

good luck!

 

You also want to make sure that the minimum monthly amount isn't more than you can comfortably afford on a monthly basis - better yet at least double the minimum. Recently Federal guidelines changed on how the minimums are calculated and some are now in the 3%-5% range depending on the lender, so that people can't have 30 year old revolving credit account balances .

Regards-
Randy

 

Very rarely (if ever) is the cash advance limit the same as the overall credit limit. For instance, I have one card where the overall limit is $15,000, but the cash advance limit is $7,500. If it does have a high cash advance limit, it is likely the check will carry with it an unlimited cash advance fee as STLMINI points out. You could probably get a loan, then use the check for a balance transfer, but paying for the card directly with the check would fall under a cash advance. With fees, I have to believe you'd probably be paying close to a regular auto loan.

3.9% is a great rate, but if you have good credit you can get a regular loan for not that much higher, and it comes with much less risk. For instance, what if they suddenly decide that you are a credit risk and jack up your APR? Most credit card agreements give them that right, and it doesn't necessarily take a late payment for that to happen.

 

Wow, I expected somebody to chime in and tell me why it's a bad idea. Sounds like, as long as I'm disciplined about making the monthly payments, it's a sneaky way to avoid the 6% (or more) on new car loans.

I'll have to read the fine print again, but this seems like cheap money. Plus, there's avoiding the hassle of a new loan or lease (which have BS fees of their own).

 

Well, look above for one reason why it's a bad idea. Here's another -- your credit score will most likely drop, perhaps substantially. In credit scoring, being close to your overall limit is a bad thing and will drop your score. Second, I believe installment debt is treated differently than CC debt in your credit score. Pulling this stunt might save a little money on this loan, but could cost you substantially more on a future loan with a lower score. Finally, as I mentioned, most likely you CAN'T. This almost certainly will be a cash advance, and unless your overall limit is 50K, your cash advance limit will probably be more like 10 - 15K.

 

check out capitaloneautofinance.com (used to be peoplefirst.com). they are quoting 5.95% for a 60 month loan. the payment on a $25k loan at that rate is $482.73. at 3.9% the same amount costs you $459.28 monthly.

I guess you need to decide whether $25 a month is worth the benefits or disadvantages.

 

Be sure the dealer will accept it - if there are any of the typical credit card fees/percentage hits to them attached to the 'check' they will likely limit the amount you can put on the card (i had it limted to 5k using the card directly for a purchase once). This limit is up to the dealer so it can vary.

 

I got a discover 0% for life on balance transfer and some visa 3.99% for life conv. checks, I cashed out the check and immediatly transferred the balance to discover card, I then cashed out another check, in the end I paid my car with cash on a mixture of %0 and 3.99% loan, and some cash out/transfer cost. The catch for discover is that after some time I must make two purchases for every month, they mean to make money by charging regular APRs on the new purchase which you can't pay off, think I can handle it with the help of Itunes .
As other have mentioned, just be disciplined to avoid penalty fees and pay attention to transfer/cash out fee.

 

Make sure NEVER to use the credit card for any other transaction while the check balance is on it - because there is a balance being carried, all other transations will be charged interest (at the "normal" rate) from the day you use the card till the day payment hits them.

My dealership also won't take a credit card for more than a few thousand dollars.

 

I doubt a dealership is going to let you do this without charging you an extra fee. A credit card costs the retailer between 2% and 6% for the transaction. If they are willing to take a credit card, then they should be willing to offer you a discount to not use a credit card, (which I also doubt would ever happen). Dealerships normally make most of their money on the backend. Backend money is payment for setting up a loan with their finance company.

I will tell you that when getting a secured loan (normal car/house loan), the bank makes SURE that their money/secured asset is protected. On a new car from a dealership, this probably amounts to making sure you have insurance.

 

I almost used one of those low interest checks that comes with my CC statement every month for my down payment.
Then I read the fine print and made a call to the CC .
1. There was a 3% process fee, no problem it would still be under the credit union finance charges.
2. If I was late on 1 payment the interest rate was going to jump to 22%.
3. Here's the kicker, I usually pay off my credit card I never make minimum payments. I was told by the CC rep that any money I sent would be treated as a payment toward the whole debt, credit card purchases plus the cash advance, and that the amount I wrote the cash advance check for went toward my overall limit.
That clinched it for me as I use my CC for all purchases and pay it off at statement due date. Flyer miles
Too many little "I gotchas" and the interest rate wound up only being about a quarter point under my credit union quote.
If you ain't got the money in the bank to back up the variables I would pass.
Sidenote- I did use my CC as part of my downpayment. Classic MINI allowed me to use $3000. But as I said it I paid it off at statement date plus I got 3000 flyer miles and a 20 day float.

 

Nor does mine. He allowed me to charge his maximum $3000 as downpayment on my '05MCS order last year. I used my ShopRite (supermarket) American Express card, and the following month I got a coupon worth $25, redeemable at any ShopRite Market (booze and tobacco excluded of course). So my grocery bill was $25 less that month .

 

Good points. The offer is at home (and I'm at work) but I believe it said the amount was good up to my credit limit.

I'm not too concerned with my credit score dropping. We're locked into a 30-year mortage at 5.something, so we won't be refinancing or looking for a 2nd anytime soon. Also, we have the capital to pay off the CC if necessary; but I'd rather have that money somewhere other than in a depreciating asset.

The reason I might not do this is because I've been thinking a 24-month lease is actually a better option for me, for several reasons. Still, it's fun to think about.

 

That's not an issue for me, since I never use this card. In fact, I destroyed the card a while ago, but left the account open. I would have no problem keeping only this single transaction on this account. But, accidentally making a late payment would be bad.

 

The dealer wouldn't know. I could write the check to myself, deposit in my account and then write a check to the dealer; certified, if necessary. No fees, other than what the CC company charges me for using their money, which is probably no worse than what BMW Finance (or whoever) will charge me to finance or lease the car.

 

Sounds like you just about have yourself talked into doing it.
Hey, if it works go for it.
It's just that it's my experience that if there are things that can go wrong.........you know job, economy, catastophy, etc......seems like it will
Anyway figure out what it will cost you if that payment gets late before you sign. If you can afford it then go for it.
Besides usually the CC company will cut you some slack for 1 late payment but that's all. Who knows between now and he end of the loan you might come into some cash.

 

Nah, I'm not convinced it's a good idea. I'm not pessimistic about something going wrong, but I am skeptical that the CC company would try to screw me somehow.

 

I did the exact same thing to by my pontoon boat! 3.99% boat loan is unheard of!

 

Don't do it! Personally, I think it's a bad idea to have much revolving credit debt. Like Outbackbob said, too much can go wrong, and cc companies will suck you dry if you miss even by 1 day!

We've payed the max the dealer has allowed us the last couple of cars (including the MINI). But we're doing it for the miles We then pay the credit card down so we're not hit with interest.

 

Well, I guess that's why you ask -- to kick around ideas like this. I'm still EXTREMELY skeptical they'd let you write a check for essentially a cash advance up to your entire limit. I'm sure they'd let you write a check for the entire amount if it was a balance transfer, but this is not.

Also, I think your worry is well-founded. The CC card company doesn't make profit by giving away large 3.9% loans, so if they can figure out a way to screw you I'm sure they will.

 

Actually, if you get the points on AMEX, this is one way to make them add up real quick. Trade the points off on free airline tickets ... If you got 300000 points, you can get a free 50" HDTV!

So ...

1. Get the checks from AMEX (might have to be an Optima Account). Write an AMEX check to the dealer. Get the points ... 25000 points is a free airline ticket
2. Use the other check to pay of AMEX immediately

Assuming you have more than one credit card, your credit rating Will NOT go down substantially (dependent upon your max credit lines) because the score is calculated on ALL the outstanding credit card divided by the Maximum Amount you could possibly borrow.

 

Hmmm... not a bad idea. I collect reward points on my Amex. I'm over 150,000 points now, although there's not much in their catalog that interests me. I suppose I could cash in and sell some brand-new electronic item on ebay.

This might be fun to see how much I can play these guys off each other. For example, I just got an offer from ING Direct for opening a no-minimum interest-bearing savings account, which has a promotional yield of 4.75% until April 15, which then falls to 3.8% afterwards. Quick, somebody: What's a few weeks of 4.75% interest on $24,000? ;-)