using credit cards to finance y2k preparations

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I know that this question has come up before, and not just at this Y2K forum. But it has been a while, and I just received an offer from one of my credit card companies that is worth asking for advice on.

I am sure that nearly everyone who has credit cards has gotten these dog-eat-dog offers from the companies offering low finance charges if you will do a "balance transfer" of your credit card debt from the other cards to their card. Often they send you checks that can be used for this. So, for example, if I wanted to transfer credit card debt from cards A, B, and C to card X, I would use these checks to pay off my debt with A, B, and C. But, of course, the debt will now be owed to X -- however, at the low rate that X offered for this. (Usually "promotional" for maybe six months or so.)

OK, here is my basic question, and how it relates to Y2K. I just got one of these promotional offerings (6 months at 4.9% APR) from Citibank, but with the following twist: one of the checks that they enclosed is made out to ME for very close to my cash advance limit. They say that this "personalized check" can be used as follows: "Deposit your Personalized Check and use the cash to pay off your other credit card companies." But it seems to me that, if I just use the money to finish up my remaining Y2K preps, it is like a loan at a very reasonable (for credit cards) payback rate, good through the beginning of 2000 (at which point the APR jumps to the standard, maybe around 16%). I really do need the money for preps, was considering using credit cards anyway, though with "fear and trembling" if I had to get into those near usurious "cash advance" type finance charges. This offer seemingly lets me have a "cash advance" without it really being treated as one.

Anyway, has anyone else seen these "personalized checks", and used it? Am I missing something? Thank you much.

BTW, the offer says that I must act quickly, by no later than August 2nd, if I want to take advantage of it. Thanks.

-- cc curious (xx@xx.com), July 18, 1999

Answers

Yes, these are quite common and just their way to get you to use more (their) credit.

The consensus I have learned from this board is to never do anything that puts you ahead ONLY if it all goes down. That said, if you feel that you can assume this credit and be able to pay the 16% or whatever after 1/1/00, then by all means use it for whatever you need.

-- sue (deco100@aol.com), July 18, 1999.


Some think that interest rates will start soaring as people and companies and banks are less and less likely to gamble on lending out THEIR money for any long periods of time.

What do you risk if things DON'T collapse and you can't pay off the loan?

What do you risk if things DO collapse and you don't have the supplies you need?

-- Linda (lwmb@psln.com), July 18, 1999.


cc:

In your position I would buy the supplies, using the 4.9% rate--providing you can pay it (or most of it) off before the higher rate kicks in. I recommend this action because, whether Y2K creates problems or not, I think there may well be a run on some basic supplies as the end of the year draws closer and I would want to have an adequate supply of, say, toilet paper. Also think about the economics of supply and demand: if some goods are in short supply, their price will increase.

How much do you now spend at the supermarket? Let's say $100/week. Okay, in six months you would spend approximately $2600 at the supermarket. If you go out now and buy, say, $2000 worth of supplies, buying the dried stuff (beans, rice, potato flakes, milk, whatever) in bulk, you'll be saving some money, maybe even enough to make up for the 4.9% interest. The money you don't spend each week at the supermarket can now go towards paying off your credit card debt. You'll have the security of knowing you're prepared for just about any emergency, natural or man-made, and won't be over-extended.

The sooner you pay off your credit purchase, the less interest you pay, the more money you save. You must be very strict with yourself: credit card payment before cigarettes and whiskey and wild, wild non-gender specific persons!

-- Better (safe@than.sorry), July 18, 1999.


cc curious:

>This offer seemingly lets me have a "cash advance" without it really being treated as one.

NO! Depositing that check "made out to [you] for very close to [your] cash advance limit" will constitute making a cash advance on your account. If you read all the fine print, it's in there somewhere.

-- No Spam Please (nos_pam_please@hotmail.com), July 18, 1999.


I would compare first. Look into credit unions, they offer lower rate cards. I have 2 at 9.99%, and I used one on my preps. I can pay it off at the end of the year if I want.. but I also can handle the payment per month as well. Just think about what you really can afford monthly...

-- Cassandra (american_storm@usa.net), July 18, 1999.


One of the possible Y2K scenarios that many people are leaning towards is that after 1/1/2000, whether or not there is only a "bump in the road", there will be recession or depression a few months further on. That is, it won't be total instant failure of infrastructure and TEOTWAWKI, but as many small and medium businesses fail, and international trade and supply fails, the economy will snowball into real bad shape.

Think about how you could service debt, and what it would cost you if you failed to do so, if you lost your job or were put on reduced hours. What about if your employer went belly-up and couldn't even pay your back pay, accrued leave or benefits? This is why many people are electing to enter 2000 debt-free. By all means use credit wisely - other respondees have said many good things. However, keeping a debt running when your interest rate automagically increases almost fourfold (or as much higher as they want to make it, their option, their choice - that WILL be in the fine print) may not be a good move.

-- Don Armstrong (darmst@yahoo.com.au), July 20, 1999.


Thanks everyone for your valuable input. Lots to think about and ask Citibank about.

-- cc curious (xx@xx.com), July 22, 1999.

No Spam is right. Check all of the fine print. Usually, even with a "balance transfer" you will be charged at least $25 just for the transaction. Most cash advances come with a MUCH higher interest rate. If Y2K turns out to be an "economic earthquake," you will be in BIG trouble if you have a lot of debt.

-- Gayla (privacy@please.com), July 22, 1999.

Gayla and No Spam are both correct...Be VERY careful to read small print...Example, we just got an offer to transfer balance for 3.9 or even lower, I told hubby to call and ask if it is cash advance percentage or what would EXACT % be....Lady on phone stated she could not give exact amount, see x times y plus z = lower rate MR. S, doesnt that sound great? HOW much replies hubby, 'well i just explained i cant tell you that, you have to transfer first'....Please, i urge you to phone the company that sent you that if it sounds too good to be true, it usually always is.

-- consumer (private@aol.com), July 24, 1999.

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