Balance transfers and 0% intro APR

[Dr. Wexler]

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Is there anything to prevent me from buying a car with a credit card with a 0% introductory APR and basically getting an interest-free loan? Is it possible to keep the no-interest loan game going longer than a year by making balance transfers onto other cards that have 0% intro APR for balance transfers? (Obviously I would be taking a gamble that I could find a 0% APR balance transfer at the end of the year.) I've been reading the fine print and haven't found anything to prevent this so far.

 

[The White Coat Investor]

Is there anything to prevent me from buying a car with a credit card with a 0% introductory APR and basically getting an interest-free loan? Is it possible to keep the no-interest loan game going longer than a year by making balance transfers onto other cards that have 0% intro APR for balance transfers? (Obviously I would be taking a gamble that I could find a 0% APR balance transfer at the end of the year.) I've been reading the fine print and haven't found anything to prevent this so far.

7 issues with this:

# 1 You still have to service the loan (and pay it off eventually of course.) Even 0% deals require monthly payments.

#2 Interest rates change. If you miss one payment, it won't be 0%.

#3 There are often initial fees, especially for cash advances. Transfer fees are also very common. You can find a card without one, but you may or may not find one that you can transfer the loan to without paying a fee.

#4 It is hard to get a dealership to let you use a credit card directly. I know, I've tried (successfully, incidentally. I had to threaten to walk out on the deal, after all the contracts had been signed.)

#5 Studies show that we spend more when we spend on credit than when we spend cash.

#6 Those who could benefit from such a scheme often don't have high enough credit card limits to buy their desired car.

#7 I know someone with GOOD credit who came to the end of the line on a series of balance transfers. After 3 or 4, he was unable to get another card. It was as if he had been blacklisted by the companies. I wouldn't count on being able to find another 0% deal, especially a fee-less one. If you want to try this for the duration of ONE deal, that is probably less of an issue.

 

[Dr. Wexler]

7 issues with this:

# 1 You still have to service the loan (and pay it off eventually of course.) Even 0% deals require monthly payments.

Yes of course. I wouldn't be getting a care for free. Just a car the cash price...no interest.

#7 I know someone with GOOD credit who came to the end of the line on a series of balance transfers. After 3 or 4, he was unable to get another card. It was as if he had been blacklisted by the companies. I wouldn't count on being able to find another 0% deal, especially a fee-less one. If you want to try this for the duration of ONE deal, that is probably less of an issue.

That's very interesting. I did not know about this. I realize gambling I would be able to find a 0% deal is riskey, but I didnt know card companies watched for this kind of thing.

 

[IceMan0824]

Yes of course. I wouldn't be getting a care for free. Just a car the cash price...no interest.



That's very interesting. I did not know about this. I realize gambling I would be able to find a 0% deal is riskey, but I didnt know card companies watched for this kind of thing.

Cancelling the card (after principal is paid of course) will remove it from your credit history. After that, the companies have no way to know your history of 0% transfers.

What is probably happening is that the card companies see a high volume of credit pulls (when you request for a new card, a hard pull is done) and this volume concurrent with a high utilization ratio (you're probably maxing out your 0% transfers) raises a red flag. Your score is also reduced when you do 0% transfers but once principal is paid and card is cancelled, the drop in credit score ends and the blacklist is over.

 

[IceMan0824]

Is there anything to prevent me from buying a car with a credit card with a 0% introductory APR and basically getting an interest-free loan? Is it possible to keep the no-interest loan game going longer than a year by making balance transfers onto other cards that have 0% intro APR for balance transfers? (Obviously I would be taking a gamble that I could find a 0% APR balance transfer at the end of the year.) I've been reading the fine print and haven't found anything to prevent this so far.

Financing the car with the credit transfer is a huge risk.
I agree with all of ActiveDutyMD reasoning.

Another to add to the list.
1. You don't have the money available. If something goes wrong (you forgot to pay your bills on time, you're disabled...) you don't have the money to repay back to the credit card company. These companies are notorious for their interest rate charges.
Those that do 0% arbitrage never touch the money they receive from the credit card companies. It's usually sitting in a savings account, a money market account or a money market fund. Simply put, the money has to be liquid in order to remove the credit card liability in case of emergency. Even if a forgotten bill payment reset their interest rate to a higher level, they cash out and move on.

 

[Sol Rosenberg]

Cancelling the card (after principal is paid of course) will remove it from your credit history. After that, the companies have no way to know your history of 0% transfers.

Not true. I have cancelled accounts on my credit report from almost 20 years ago. There is no set time limit (to my knowledge) for the bureaus to remove non-derrogatory information. HOWEVER, usually (but not always,) if you dispute non-derrogatory information, the bureau will just remove it, instead of wasting the time with an investigation, etc, so maybe you can get it off that way.