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Author: brettrkr Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308542  
Subject: Any number of gotchas! Date: 12/17/2005 3:44 PM
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This post is to expand on the great discussion about using cc (credit card) company checks to fund high interest savings accounts - http://boards.fool.com/Message.asp?mid=23418242. I thought the strategy was great and I wanted to make a contribution in its effot.

This post is oriented toward general transfer and check pitfalls. The strategy was laid out very well by cocomurph1, so I'll only discuss the gotchas! As there are many. To put it lightly and take a quote from one of my favorate movies - Heat (great acting between Pacino and DeNiro), "They can make mistakes. You can't make a mistake once." Well, that's probably paraphrasing but it holds true.


1. Don't EVER be late!

2. Link the savings account with the credit card account and transfer about 10 days before the due date. This gives you some time to clean up any potential mess. Be prepared to mail in a payment or pay by phone (watch for service fees here - get that info up front).

3. Schedule automatic transfer to the credit card company from savings account.

4. Setup bill pay for the savings account in your regular checking account as a backup in case the savings account transfer fails. This means having enough funds in your checking to cover at least one minimum payment.

5. Sometimes you must use certain check numbers. Three checks may be for a 3.99% life of loan while two may be for 0.00% until some date.

6. Make sure you take advantage of the offer before the offer date expires. Other wise, you may be cutting a check at some outrageous rate.

7. Note the transfer/check fees. It's unlikely any of this will be completely free. Fees are usually capped at $50 or $75. These fees apply to each transaction. Read #8.

8. If you have two cards with the same bank, combine them and use the combined limit to avoid higher fees and more administration from using two cards. Note that the card going away may take $500 or so worth of credit limit with it. If cardA has $5,000 and cardB has $10,000 and you combine B into A, you may end up with less than $15,000 because $500 was held with cardB. Just a small note so you aren't surprised. Companies usually have no issues with combining accounts.

9. If you have been shredding all of those check offers sent from your credit card company, just wait around, you'll get more. These are sent out by the marketing department and not the person you speak with for billing disputes or general account inquiries.

10. Don't charge onto the card if possible while the new balance is there. Credit card companies usually apply payment to new purchases and what ever is left trickles down to the transfer amount. If you have $10,000 worth of transfer and accidentally charge $500 then send in a payment of $500, get ready for the fireworks. For all of your work and detail, this will probably put you in an unrecoverable position with respect to the investment. If that is the case, transfer the money out of savings account, pay off the loan and wash your hands of it. Take what you learned and move on.

11. This is simply the reverse of #10. You may have a balance on the cc already and then the check amount ends up on top of that. No payments are applied to the existing balance until the check balance is paid off. This may very well put you in the negative as the interest rate tied to the existing balance could be more than the Emigrant rate.

12. If you setup auto payments for the minimum with the credit card company, be very sure you check minimum payment and not entire balance. It's easy to overlook this as sometimes the cc companies don't make it so clear. That mistake could cost your entire checking account balance, tons of NSF fees, cc payment late fees, hours of phone calls, your utilities being cut off. Well you get the point. It's just a bad situation. Probably the worst of all listed here.

13. From the above link, there is mention of a “Universal Default Clause”. That means if your FICO score rapidly changes by some great amount, you could get slapped with fees. You'll need to call the cc company to clarify their stand on it.

14. If you have an existing balance, be sure the check amount does not push you over your credit limit.

15. Call the cc company when in question for anything. Be clear on everything. When you are about a month from the offer ending date, it's a good idea to call the cc company and get another confirmation on when the balance should be paid off. It isn't uncommon to get conflicting information about this.

Some of this is probably repeating itself from other posts. I just wanted to put it all in one list in one place. Other than that, good luck!

Brett
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