Cash Advance on Credit Card (Updated)?
I have been offered from my credit card company a cash advance up to $20,000 with a .99% APR for one year. with a maximum transaction fee of $75. My idea was to take the money and put it into a money market that will get me around 5%, make the minimum monthly payments, and make several hundred dollars in interest.
I have been considering this and it seems like a good idea to me. I don't need the money, the sole purpose would be to make interest. I don't see any downside here. What do you think? See the terms below.
"† The promotional Annual Percentage Rate (APR) offer for Balance Transfers and Check Cash Advances is 0.99% through your statement Closing Date in December 2007. These promotional rates will extend through your statement Closing Date in March 2008 if a new Balance Transfer or Check Cash Advance posts to your account on or before your statement Closing"
† The promotional Annual Percentage Rate (APR) offer for Balance Transfers and Check Cash Advances is 0.99% through your statement Closing Date in December 2007. These promotional rates will extend through your statement Closing Date in March 2008 if a new Balance Transfer or Check Cash Advance posts to your account on or before your statement Closing Date in December 2007. However, your promotional rate period may end sooner. If any Total Minimum Payment Due is not received by the Payment Due Date or if your total outstanding balance exceeds your credit limit on any statement Closing Date ("promotion turn-off event"), then as of the first day of the billing cycle in which such promotion turn-off event occurs, the promotional period will end. Thereafter, the APRs for all new and outstanding Balance Transfers and Check Cash Advances will be increased to indexed rates that vary according to the Variable Rate Information disclosed in your Account Agreement
We will allocate your payments to balances (including new transactions) with lower Annual Percentage Rates (APRs) before balances with higher APRs. Borrowing the full amount of your available credit may result in an overlimit fee, as applicable.
The transaction fee for balance transfers is 3% of each transaction, minimum $10, maximum $75. However, effective as of 03/2008, each balance transfer is subject to a 3% transaction fee, minimum of $10 and the Minimum Finance Charge is $1.50.
This was something that was popular a few years back, when so many credit cards were offering 0% rates. No, it will work just fine for you, and yes, you'll earn an OK return. A few things: be sure to pay it off on time, or the interest you get hit with as soon as the promo rate expires will eat hugely into any gains. be sure to pay all of your other bills on time- many credit card companies are immediately canceling promo rates and hitting people with the maximum rates as soon as they miss any payment on any bill. Also, if you cancel the card at the end, you will take a small hit against your credit rating.
I still have question on the interest rate you posted. Is it really 0.99 % or 9.99%. This interest seems kind of odd because most bank offer either 0% or 9.00%, and not something like 0.99% (like close to 1%). One more question, do you have any balance on this credit card? And do you know the cash advance limit is different than your credit limit? What are you credit limit and what is your cash advance limit? Yes, there are credit card company offer 100% of your credit limit as your cash advance limit, but mojority only offer 50% of your credit limit as cash advance limit.
I personally still think is not a good idea, but if all terms are ture and you owe ZERO on this credit card, you can give it a try and see how it work out. You might learn thing the hard way or you might just got lucky and make a tiny little bit money. By the way, what if something happen unexpected and you cannot pay the credit card company back in time before the interest rate goes up? Are you willing to pay that 20% interest after the March 2008? It is not a good investment idea…I would still say NO. You didn't mention how the interest would be compound for that market market account you are talking about. The 5% APR calculation is much complicated than just $20,000 x 0.05 / 12 month in a year = $83.33 per month interest. It depends on how it compounds. Most likely you will make LESS than $83.33 interest per month.
Read thru all the literature very carefully. Another thing many of these low special rates are requiring that you use the card a certain number of times per month. The new charges are at the regular interest rate.
If you have a credit limit that is about 30K, and you charge only 2K a month and pay it off every month, then you might be able to do it. If your limit is $20-$22K, then they want you to go over the limit, hit you with a over limit fee, and then they can charge you any interest rate they like.