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I know I'm a fool because I wanted to by $3500 worth of AMD last year when it was selling at $15 and I let my so called professional investor talk me out of it. Now I'm with Ameritrade. My Question is this. I don't like credit card debt and I have always paid in full each month. Last year I had the need to pay back a $7000 loan to my retirement fund and I temporarily put it on a visa. (I get miles for that). Before I could pay it off I got an offer for a new card balance transfer at 2.9% for five months. I decided to do it. When that time was up I got an offer for another card balance transfer at 1.9%. I also took that. I have the cash to pay off the card but I keep getting these low interest balance transfer offers. I am making large payments on the balance but I am also making considerably more interest on the cash. Am I crazy or just still a fool?

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I have the cash to pay off the card but I keep getting these low interest balance transfer offers. I am making large payments on the balance but I am also making considerably more interest on the cash. Am I crazy or just still a fool?

I believe in making informed decisions. In this case, it is weighing the rewards with the risks ("taking prudent risks"), with a dash of personal preferences.

An obvious reward is that you are "making considerably more interest" on the cash. Is this after accounting for taxes?

On the other hand, paying off credit card debt is like getting a guaranteed, tax free return on investment equal to the interest rate you are paying on the card.

One risk is that the low-interest balance transfer offers may dry up. (Some credit card companies will realize you are playing musical cards with the debt and stop their offers. Some other credit card companies will look for the least little excuse to do "rate jacking".) If you have allowed for this possibility (which it sounds like if you have enough cash to pay off the debt), it might not be a concern as long as you have liquid assets or cash that can be used to pay off the credit card debt when it becomes more expensive than the after-tax "interest" you are getting from your cash.

Depending on the instrument of where you cash is located, there may be the risk that the interest it is paying may go down.

If your personal preference is to be done with that debt or to just not worry about the balance transfer once every few months, it may be just as well to pay off the credit card debt. (That's what I would do, but I like to keep my finances simple.)

The first time I heard of carrying a balance at a teaser rate and saving in a money market account, I thought it was foolish until that person told me the interest rates, and then it started sounding Foolish. (Big F = good; small f = bad.) Even though it is not my cup of tea, I don't see it as poison, either.
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The first time I heard of carrying a balance at a teaser rate and saving in a money market account, I thought it was foolish until that person told me the interest rates, and then it started sounding Foolish. (Big F = good; small f = bad.) Even though it is not my cup of tea, I don't see it as poison, either.



I just can't see doing this (Although I know many people who do). IMO, I think it is a waste of time and brain power to have to apply for different cards, transfer the balances, remember when to retransfer them, etc. Plus, if you apply for a mortgage or other loan, all of the POSSIBLE balances on all those CCs can be (cumulatively) counted against you.

I think it is Foolish to just pay the thing off and put your financial attention towards investing.
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I think it is Foolish to just pay the thing off and put your financial attention towards investing.

I basically agree and indeed that is what I do. Just a few dollars is often not worth the effort.

However...

I think it is a waste of time and brain power to have to apply for different cards, transfer the balances, remember when to retransfer them, etc. Plus, if you apply for a mortgage or other loan, all of the POSSIBLE balances on all those CCs can be (cumulatively) counted against you.

One can use a calendar or a Personal Information Management program to remind one that one has to start applying for the next card with a teaser rate.

One has to remember to close accounts one is no longer using or, as you indicated, the credit limit can be viewed negatively by mortgage companies and other credit card issuers.

If one is planning on applying for a mortgage, I would recommend getting a copy of one's credit report from all three credit reporting services at least 3 months in advance so one would have time to clean up errors, close unused accounts, and see what negative marks the lendor would be seeing. However, I would recommend getting the cedit reports a few months before applying for a mortgage, whether or not one is playing musical credit cards.

Then there is the hastle that one must keep up on the payments--probably postage costs, probably using up checks one paid good money to have printed, possibly also a per-check charge.

I mentioned taxes on the interest in my previous message.

By the time one considers all the expenses in the scheme, it seems that the profit is likely to be very small and I doubt it is worth the effort.

However, if someone has decided to use teaser rates to borrow a few thousand dollars and keeps those few thousand dollars in a money market fund or CDs and is able to come out a few dollars ahead after taxes/postage/check printing charges, I wouldn't condemn that person. At least that person is a few dollars further ahead than I am with my visits to this board. 8)
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