These are valid concerns. Yes, a credit card company can raise your
interest rate for ANY reason. I think by law they have to notify you
of this beforehand, and you can cancel the card and use it under the
old terms (and if you say you don't read all the stuff CC companies
send you, then this probably isn't for you). But I am not
sure. Nonetheless I think these are trivial issues if you've never
been late on a payment and naturally track what is happening with your
credit cards (the online world makes it easier especially with
resources like chaseonlineplus.com).

The question then is whether it's worth saving $1000/year or more.

I also would do it so that if push comes to shove, one can pay off the
entire balance in the credit card instantly. If one can do that, then
why not just pay down the actual loan? I'm not sure I have a good
answer to this but I definitely resist the idea of saving money when
it's not necessary--if you're in a very secure position with regards
to income and young, I think it is better to spend money (or heck,
even give it away) than to pay down fixed rate loans that'll get paid
off anyway in time. I struggle with this issue a bit since I have no
respect for money.

--Ram

Chris Smolinski <cps[at]blackcatsystems.com> wrote:

- quote -

Chris Smolinski wrote:
- quote -

Yes, that's right...when you read the fine print "fixed rate" credit
cards have many circumstances where the rates can adjust back to the
normal ones. Capital One was under investigation for this earlier this
year, I'm not sure how it panned out, but they aren't running those
"sack the village" ads anymore are they? Toned them down anyway.

For example if you miss a payment, you get flipped over to the rack-rate
interest rates - you know, the high-teens, low-twenties kinds of levels.
I think with some of them, the adjusted rate can even date back to the
original date of the loan! I've seen that on zero-interest consumer
credit cards issued by stores, like Best Buy.

And it's not just a missed payment, which you might be able to avoid
with internet banking or something like that. Not sure if Capital One
was one of them, but some agreements say that the issuer can change the
rate if it reviews your credit and decides that your creditworthiness
has dipped, making you a riskier customer. Look at the posts over the
past couple weeks, "I don't know why but my credit score dropped 15
points when I didn't do anything." Would that be enough to terminate
your "fixed" rate? I don't know who wants to take on that risk? I would
assume that the issuing bank will do everything possible to get people
off the fixed rates. That is how they make money after all.

Bottom line is I think it's a terrible idea to shift mortgage or
home-equity debt to a credit card, unless you have a VERY short window
for paying it off. Too much can go wrong, and when it does, you're into
a different kind of debt, with much higher interest rates and penalties.

-Tad

In article <1120091862.783135.32470[at]g43g2000cwa.googlegroups.com> ,
mikepier[at]optonline.net wrote:

- quote -

One potential risk - don't many of those deals include fine print that
allows them to change the terms at any time?

I ran this idea past a friend, and he says a friend of his (ok, a friend
of a friend story, but bear with me...) did this, and then a few months
later the bank jacked up the rate to 8.9%. Apparently this wasn't the
result of missing any payments, etc, or so he claims.

Thoughts?

--
---
Chris Smolinski
Black Cat Systems
http://www.blackcatsystems.com

Your right John. I called Discover again, and they said that the
minimum payment would go towards the low interest loan first. All
subsequent purchases are charged at the higher interest rate, which is
13%.
But I'll keep on the lookout for those 1.9% deals that come in the mail
from time to time.

mikepier[at]optonline.net wrote:

- quote -

I am an existing (and long time) customer of all those cards and was
when I received the offer. I do have an amount at 1.9% fixed for life
of the balance in the AT&T Universal card (the same amount is put in
ING Direct at 3% so I'm coming out slightly ahead even with
taxes). But I myself don't think this is a good choice since I'm not
comfortable with debt (just haven't found time to think through this
issue).

--Ram

mikepier[at]optonline.net wrote:

- quote -

I received an offer like this too. I suspect this offer is where the
purchase will be charged interest at the regular rate for the card,
and as Elle pointed out, any payments you make will go towards your
lowest interest balance first. So even though you might have 0%
interest on your initial balance, your purchases balance will have a
higher rate and you'll end up paying interest on it.

In fact, when I got my 1.9% fixed from Citibank I couldn't use it for
that reason, since I use that for my day-to-day purchases.

- quote -

Which is a fair amount of pocket change, even for a 2-4% interest
card. You'll also pay the loan off early.


--Ram

I thought the person I spoke to said the 2% monthly payment would apply
to the full balance. I have to ask again.

<<So lets say I use the card to buy $500 worth of groceries and gas
every month. My monthly balance is $10,500. And only 2% is due a month,
which is $210.>
But the $210 monthly payment would only be applied to the original
$10,000 loan. Your monthly $500 charges would pile up, month after
month, and at a much higher interest rate.

John Cowart

- quote -

This wouldnt work because your monthly payment would go toward paying
down the $10k at 0%. They don't let you choose how your payments are
applied. So your monthly charges would just sit there at the normal CC
rate until you paid off the $10k.

I used one of these CC offers to buy my car. Worked out well. 1.9% is
much better than any used car loan out there.

I just called Discover, and they offer a 0% APR until Jan 2006, then
after that, as long as you use the card 2X amonth, the 0% APR will
continue. The only amount due every month is at least 2% of the
balance.
They also have transfer checks which you can use to write checks to
yourself or pay mortgage bills.
It sounds like a good idea. I have $330,000 left on my 30 year
mortgage. When I run the numbers, assuming I paid it down $10,000 today
I would save in interest:

$3658 after 5 years
$8652 after 10 years
$46566 after loan is paid off in 29 years

So lets say I use the card to buy $500 worth of groceries and gas every
month. My monthly balance is $10,500. And only 2% is due a month, which
is $210. You can keep this cycle going while the $10,000 is in a high
earning CD.

<mikepier[at]optonline.net> wrote
- quote -

Mike, from what I've seen, Ram is correct. These offers change frequently
and I think do depend on who the customer is. Also, increasingly in the last
few years there have been no balance transfer fees.

Typically the credit card company sends a check to an existing customer
which clearly states an interest rate of say 1.9% applies for the life of
the loan.

I bought a piano on credit with one of these offers a few years ago and saw
no shenanigans by the credit card company.

The one caveat is that one should use these "special offer, low interest
rate for the life of the loan" checks only after wiping one's latest credit
card bill from the offering company thoroughly clean. Double check that this
is done. If one does not, and starts with say $500 on one's bill from
various and sundry purchses, subsequently using the low interest rate check
to pay off say $20,000 of mortgage, then one's monthly payments go towards
strictly the $20,000 low interest part until it's paid off. The $500 remains
unpaid and has a much higher rate of interest charged on it. One cannot
selectively pay off different debts on one's credit card bill. The rule is
that the lower interest bearing debts must be paid off first.

I suspect this is where the credit card companies are making a bit of
profit with these deals.

Checking scrupulously the status of one's payments and one's credit card
account via the web, so one never misses a payment is not difficult, IMO.
The barriers to doing this are not so great considering the payoff.

If this will require opening a new credit card account, then I would obtain
my three credit reports from the three bureaus (Experian, Transunion, and
I-fugget-the-third) first, though, and then check for errors. Clearing these
up will save some time. The credit reports don't take long to arrive.

Ram Samudrala wrote:
- quote -

Ram, I just called all 3 CC companies, and they do not offer that deal.
They only offer 0% for 12 months. Is this 1.9% for life deal only for
existing customers?

In article <d9r2b1$bfh$1[at]gnus01.u.washington.edu> ,
Ram Samudrala <ram[at]sp1.compbio.washington.edu> wrote:

- quote -

There are 2 catches...

1) credit cards normally have a minimum payment of 2%, and
there is a move on to make that 3%. So, the payment on a
$100K mortgage would be around $550, while on a credit card,
it would be $2000 or $3000 a month.

2) these deals are set up to make it very easy to miss a
payment and lose the deal. For example, I have one of these
1.9% until paid off, and that company seems to be able to
lose my statement or mail it the day before it is due at
least once every 4 or 5 months.

If you do this, you really have to watch it close, and never
depend on the credit card company to send you a bill. You
almost have to pay via website to keep them from stashing your
check for a week or two and claim that you paid late.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

AT&T Universal, Chase, and Citibank in my case. There are no balance
transfer fees associated with these offers of 1.9%.

To answer another poster's query, they usually give you these balance
transfer cheques which you can pay to yourself or to the bank directly
(and yes, I'm absolutely positive these are cases where any use of the
cheque is considered a "balance transfers" under those terms).

So it looks like people have done this successfully. The advantage
seems to be pretty strong. If you have a principal balance of $500K at
6% and have 25 years left to pay it off, you'd end up paying about
$470K in interest over 25 years, whereas if you just paid it down $5K
(so the principal becomes $495), you'd pay only $450K in interest,
thus saving about $20K over 25 years (which is $800/year).

Paying only the minimum for the $5000K will still take 177 months to
pay it off, but one would only pay $432 in interest.

--Ram

mikepier[at]optonline.net wrote:

- quote -

Ram Samudrala wrote:
- quote -

What banks accept credit card payments for mortgages? The bank would
have to pay ~2% of the payment to VISA/MC so because of that, I'm
unaware of any banks that accept CC payments. Cash advances do not get
the low APR so that wouldn't be a wise option, either.

Are there banks that accept CC mortgage payments? Which ones?

Regards,
Chris

On Tue, 2005-06-28 at 15:40 +0000, mikepier[at]optonline.net wrote:
- quote -

Almost any new credit card. My wife just got an offer from Discover 0%
APR for life on balances transferred when the account is opened. However
most of them have a 3% transaction fee.

I have done exactly what you described. I have a Home Equity loan. A few
months ago I paid off half the home equity loan with a credit card with a
1.9% APR fixed until the balance is paid off. I pay minimums on the credit
card and am reducing the home equity loan at a very rapid rate.
One caution, without real financial discipline these actions can lead to
disaster.I am totally debt free except for these two loans and plan to pay
off all loans as rapidly as I can.


"Ram Samudrala" <ram[at]sp1.compbio.washington.edu> wrote in message
news:d9r2b1$bfh$1[at]gnus01.u.washington.edu...
- quote -

The low rates are usually temporary. I never heard of an offer that
keeps the rate at 1.9% until the balance was paid off. Who is making
this offer?

This is an academic question, since I don't advocate taking on
monetary debt.

I, and people I know, routinely get offers for credit cards with a
1.9% APR fixed until the balance is paid off. If someone has a
fixed-rate 30-year mortgage with rates around 6%, then does it not
make sense to use some (at least half) of the credit card limit to pay
down the principal immediately and then pay down the resulting credit
card balance slowly? Even paying only the minimum and taking a long
time to pay off the credit card seems to be significantly advantageous
in terms of total interest paid considering the front loading of
interest that occurs with mortages.

Is there a catch that I'm missing (besides impact on FICO scores,
which can be handled properly or screwing up and having the rates
rise)?

--Ram