Questions for the experts...

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midline
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Questions for the experts...

Postby midline » Sun Jul 17, 2011 10:21 pm

I'm a long time rewards card/APR chaser, but just found this site today. So, I've been at it on my own for a while, but now that I've found a place to ask, I want to ask a question or two. If I needed to post somewhere else, please just let me know.

I have around 5-6 cards and pay them all off monthly.
1day-to-day card
1 big purchase card,
1 old card that I use once in a blue moon but have had for what seems like almost 20 years 1 emergency only card
And a Lowe's card I got years ago to take advantage of some kinda 0% deal

I've had all cards 5yrs or more. All (except maybe the Lowes, no idea about it) have what I think are decently high limits . Credit is excellent. So here are my questions:

1.) I am thinking about taking a low purchase APR card, using it as much as possible, taking what I put on it every month and putting it into a fairly secure short term bond fund (currently 3% yield and averaging 4.5%-6% return over the past decade with no major dips or jumps). Paying a little more than the min every month and and then pay the card off in 12-18 months and have the return and rewards for spending cash. How bad of an idea is that? Shouldn't really need to pull credit for anything (car/home loan) during that time either.

2.) Should I keep that Lowe's card I've had for 10 years. Never use it. Never even think of it. I know it's active because I just a got new card.

Thanks,
Midline


Money card
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Postby Money card » Mon Jul 18, 2011 10:07 pm

I will do the best I can to help you out. If you find an offer of 0% and you want to pay just a little over the minimum that might be ok depending upon your paycheck and your money markets, mutual funds or savings account.

Right now after myfight with Chase, I currently have a Capitol 1 visa gold card I pay my bill in full. I also have 2 applications for a Hsbc union credit card NOT the bank card. it's a mastercard. i also have 4 applications with 0% for citi cards.

However if the cards you are looking at have 5%, 4%, 9% etc I would pay the bill in full.

For example if you charge $ 210.00 and your interest is 5%. let's say the minimum payment is 10 and you pay 21 dollars a month, that might hurt your score. But if you find a 0% interest card then that's fine.

Is that card a Lowes store charge card or the Lowes American express credit card?

midline
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Postby midline » Tue Jul 19, 2011 5:28 pm

Lowes is a store card.

I am just wondering if there is any risk to my credit score if I carry a large balance on a 0% card if there is still plenty of liquid assets (cash, mutual funds etc) and my other cards have a 0 balance?

Money card
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Postby Money card » Tue Jul 19, 2011 6:44 pm

Since it's a charge card and you can only use at Lowes this is what I would do. let's say you buy things once every 3 months
the times you do go there you can use the card. I wouldn't cancel the card. A sales person from Lord&Taylor metioned to me it's better to let the card deactivate than cancel.
I have a kohls card that has deactivated lord and taylor , Disney. I would say keep the card if you go to lowes use it if you don't go to lowes don't worry about it.

Capital
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Postby Capital » Tue Jul 19, 2011 7:45 pm

I would keep the Lowe's card since you have a lot of good credit history for that account (which you would lose if you canceled the card).

As for your investment strategy, I would go for it. Sometimes Capital One will send me 0% for 6-12 months Purchase Checks that I write to myself and then throw into a high yield 6% savings account and pocket the interest for using their money. In the past, I have also used these funds to trade stock, though this is akin to gambling.

midline
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Postby midline » Tue Jul 19, 2011 10:12 pm

Capital,

Thanks. I assume Capital One sends those checks to you because you are already a card holder.

DoingHomework
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Postby DoingHomework » Wed Jul 20, 2011 2:14 pm

This is a little confusing. It sounds like you are trying to borrow from the credit card by spending and delaying repayment. If your goal is to make money from the "float" then it could work IF you can get a better rate on SAFE bonds than the rate on the card. This would almost never be true except as a result of a promotion. In that case you'd probably have to pay an annual fee. If not, and teh numbers work out, then you might be able to make a few $ this way. Just be sure you completely understand what you are doing.

midline
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Postby midline » Wed Jul 20, 2011 7:01 pm

Doinghomework,

That is exactly what I am asking about. I want to take a promo card with no annual fee, 0% APR for 12-18 months on purchases (so no balance transfer fees) and a decent cash back reward. I would take every penny I spend on it for normal everyday purchases each month and buy into a no load, no transaction fee short term bond fund that only deals in very high quality us government and corporate bonds. I use this fund as my ultra conservative allocation. It steadily produces yearly returns in the 4%-5% range with most coming in the form of yield. It has a total expense ratio around a 1%. Pay maybe double each month of the min monthly payment and at the end of the promo period, sell it off and pay the card off. So...if my math is right, and there is no world-ending financial meltdown (the fund weathered the terrible market of the past few years unphased and is doing well in the upturn too) the cash back (5% for 6 months on gas/groceries then 1% thereafter) should more than cover the funds expenses. That leaves 4%-5% return on the "float" from the promo offer.

I am just concerned about it negatively and significantly effecting my credit score.

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Mogul of Pineapples
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Postby Mogul of Pineapples » Tue Aug 02, 2011 11:14 pm

Midline,

Normally I would advise against that but the bond fund you mention does sound quite conservative. The problem though is that credit lines are not what they used to be. Even if you had a $30k limit and used 30% ($9k) to do this, if your yield is 4% to 5% you are only walking away with around $400 to $500. However you're probably more likely to get a limit of $10k to $15k even if you have stellar credit, which would earn you only a fraction of that if you kept the credit utilization at below 30%. Being that the best credit card promotions right now actually give that, you may be better off just going with one of them.
Disclosure: I am a moderator/paid staff of this site, which does have advertising relationships with some credit cards that are discussed and linked to. Regardless, anything I say is my honest opinion.

Current Cards:
American Express: Blue Cash, Simply Cash Bank of America: WorldPoints Platinum Plus Chase: Amazon, British Airways, Cash Plus Rewards, Freedom, Ink Cash Citi: Thank You Premier, Dividend Platinum Select Discover: More
Primary Everyday Card: American Express Blue Cash
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