So I called last week to cancel a credit card I've had since college (12 yrs ago) because the interest rate was way too high. They tried everything in the books to keep me around but I wasn't interested until...

...they offered me a $20,000 credit line with a 1.9% interest rate on balance transfers for the life of the balance!

That obviously got me to thinking, hmmm...

I've been approved for a BMW loan at 5.6% but my Mini isn't here yet so I still have time to choose another payment method.

Sounds like a no brainer but what do you guys think? I figure I take the BMW loan and pay it off with the credit card. This way I build my credit (especially auto), pay my car off sooner, and have a little more flexibilty with my monthly payment if need be (ex Christmas).

 

They probably meant 1.9% per month, comounded daily.

Better read the fine print carefully. They may have a clause that applies a larger % on the entire balance if you are late on one payment, or something else devious.

 

Watch for any balance transfer fees.

Often there is a % that you pay relative to the amount transferred.

 

Paying off a car payment is like a purchase, not a balance transfer from another credit card. It will probably have the full blown interest rate not a transfer rate.

 

As the saying goes ... "the devil is in the details."

 

Not that it applies to this exact case.

A friend of mine goes a while back to buy a mustang.
He goes to pay for it with his CC. It was like a
cash back CC or something.
"we don't take credit cards for car purchases"

He actually had the cash and ended up writing a personal check.

None of the above applies to my main idea.

The Man sits around all day thinking up ways to really screw you.

I'm pretty sure there is fine print that says that CC is 1.9%
until they give you 30 days notice that it is 32.9%.

I'm not making a joke on it either.

 

1.9% compounded interest over a 5 yr car loan isn't a whole lot different than a lower simple interest rate like you've been offered for the car.

 

I would definitely go with the auto loan you mentioned.

 

So here is the bottom line:
credit card payment--

a autoloan at 5.6%---

So the question is to save 30 some odd dollars a month is it worth taking yourself into a lower credit rating, and risking screwing yourself. Remember, the credit company will watch, you pay one thing, I mean one thing, like your power bill late. or you take out another loan, your interest rate goes up to 28 % instantly...

 

Yep!

 

Use the auto loan. The CC guys all have "999" tatoos on em.

That 1.9% sounds sweet, but it is a rigged game.

 

Using the payment estimator as JAceMin graciously provided the savings equals $33.27 a month credit card over bank financing.Multiply that amount by 60 months and the savings then totals $1996.20.

As tempting as it sounds from the CC company personally I would go with the standard finance loan.There was a thread posted not that long ago for PenFed that several NAM members applied for and got something like 4.9% for a car loan.Just another option for you to look in to.

Link:https://www.penfed.org/index.asp

 

I just bought my Jeep with a credit card for the reward points; it was just the difference from trade value, etc., but it was worth a $250 Visa gift card to me.
They said the same thing; "we don't take cc's for the purchase..."
And I said, "you won't sell me a car then." They took the card.

I wouldn't use a cc to finnace a car though. Look for a personal line of credit from your bank or a small home equity thing instead.
Or just pay for it; that's my philosophy for cars.

 

I agree unless you plan on paying the car off before the 30 days are up... Don't risk it. Nothing on the CC balance transfer is set in stone. An autoloan secured with the car as collaterial is fixed.

As for rates... I just got less than 4.5 from my dealer, not through mini finance, they went to a bank. Talk to the finance guy they want to keep as much money at the dealer as they can. Rememer the rates just went down...

BTW: I know my mini dealer wouldn't let me pay for my car on my CC. I wanted to put my deposit on it, but they said 2k max on a CC. When I bought one of my Cayenne(s) I paid for the whole thing on "private issue" Discover card. I got a lot of cash back then again my porsche dealer let me pay for half my 911 with a personal check and drive off because I've been a customer for a while. and I also didn't have to pay MSRP at porsche unlike Mini.

 

How long is the 1.9% last for? Chances are its only for a year or so...and then reverts to some prime + margin type deal...which isn't bad now either.

But I'd go with the car loan for sure...You could always make higher payments to pay it off faster.

 

get a penfed loan, 4.25% on car loans Pentagon federal credit union.

 

NYCrooner, if the offer has no balance-transfer fees, and you verify that the rate is for a fixed amount until the balance is paid, then you will save money. You also need to verify that there's no pre-payment penalty on the car loan, since you'll be sending them the balance owed shortly after you take out the loan.
One other thing. On the credit card, make sure your balance is zero on the statement the month before you use it for the balance transfer. Then, use it once and only once for the balance transfer, and then put the card in a drawer and never use it again until the balance is paid off. If you use it, your "new" charges will be at a much higher rate, and 100% of any payment you make will be applied to the balance with the 1.9% rate, so you'll actually never pay of any other charges until you pay off that balance transfer. Credit card companies are sneaky, and this is one of the sneakier things they do. It's buried in the fine print in the section on how new payments are applied, and almost every credit card company does it.
I've used low-interest transfer offers before, the same way you're planning on. I got a new card once, 0% for 18 months, and no transfer fees. I made the transfer, made just minumum payments for 18 months, then sent them a check for the remaining balance on the 18th month, and cancelled the card. Customers can game the system, too, if they know the rules!
Trivia: what do credit card companies call customers who pay their balances in full each month? deadbeats! (this is not a joke).

 

Not everyone works for the government .

 

Somebody will beat me to it - you can join the penfed
for a $20 donation I think. (anybody)

 

There's a minor detail that no-one has mentioned yet. Federal law now requires that the minimum payment on a credit card is 4% of the balance (brought in to "help" people who can't work out that paying 2% will never pay off the card). That means that the minimum due on your card the 1st month if you pay $20k will be $800. That seems kind of high for a car payment on a MINI to me.

 

I don't pay anywhere close to 4% for minimums on my cards...

 

RustyBoy -Agro is correct, new regulations have increased the monthly minimum payment on credit cards to around 4%. This effectively makes the initial payment about the same as on a 2-year car loan, give or take, depending on the interest rate. I'm not sure if this new regulation has been rolled-out for every credit card, but it will be in effect soon for everyone, and is a federal regulation. The minimum monthly payment will decline each month, as it's a fixed 4% of the balance, but the first few months will have very high payments compared with a 4 or 5 year car loan.

 

Ahh, missed that qualification criteria. I assumed you had to be military to join the NMFA.

 

Hmm, well I haven't seen it yet. Guess it's good that I don't really carry balances .

While I understand the issue of people not actually paying down their Credit Card Balances, I'm not entirely sure how this helps anyone. Most of the people that are making minimums are doing so because they can't afford to pay anything more. So now that the payment is effectively double what it was, how are they going to pay it at all?

Case in point. Lets say after everything is done, I only have the money to make my $400 minimum payment + $50 extra on my fictional 20k dollar credit card balance. Now the payment has gone to 800 a month. How can I afford this? Soo... now people are defaulting left and right on their credit card obligations, screwing up their credit, going to collections, etc.

So to help people get out of debt, we've put them further into debt (And potentially ruined their financial stability by making their credit FUBAR).

Another great example of the government legislating without thinking.

 

Do NOT cancel that card. Keep it with a zero balance, and occassionally put a little something on it and pay it straight away. The worst thing that you can do is cancel it - this WILL hurt your credit. With them you have a LONG history which is great (and hopefully a very steady payment history of "on time"). Ideally, you want to have 3-4 cards with a steady history of payment.

The card's special "transfer" thing may not apply to what you have in mind but it's a nice idea if that works out. One more thing - pretty likely there's something in 4 point font that says "if you miss one payment that you are back to a really high rate".