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I received checks from them today that enable me to borrow up to my line for 2.99% through November 07. I know there is a transaction fee maxed at $75. I can buy a cd paying 6.25% with the money. Is there any catch or anything I'm missing about this deal? I called Bank of America and they said there weren't any fees besides the $75. They were even willing to wire the money to my bank for me.
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I received checks from them today that enable me to borrow up to my line for 2.99% through November 07. I know there is a transaction fee maxed at $75. I can buy a cd paying 6.25% with the money. Is there any catch or anything I'm missing about this deal? I called Bank of America and they said there weren't any fees besides the $75. They were even willing to wire the money to my bank for me.
Please tell us where you found a CD for 6.25%. Best I have found recently is 5.6% for 6 months (at Superior Savings of New England). Thanks.
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Pentagon Federal Credit Union has 3, 4, 5, and 7 year cd's at 6.25% thru January 31st. I found them about a year or two ago right here in this forum. Their rates are almost always the best I can find anywhere. They are at www.penfed.org
They told me they are the third largest credit union in the U.S.
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That is an MMA and requires a 36 month agreement. If you compare to other banks at 6mos or 1yr you can find better rates, but this is pretty good for 36 months.
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I received checks from them today that enable me to borrow up to my line for 2.99% through November 07. What happens to the rate after November 7th? You could do a 9 month CD i guess. Remember...convenience checks are convenient for the bank, not you.
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Is there a difference between a MMA cd and a regular cd? I have other cd's at Pentagon and I get an interest check every month (or I could have had the interest compound). I have other cd's maturing later on this year and personally I think it will be impossible to get a 6.25% rate later this year or any time within the next few years. I plan on buying a cd with the BOA checks and then paying the credit card off before November with the proceeds of my other matruring cd's.
Back to my original question. Is there any fees or charges I'm overlooking using the BOA checks?
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Back to my original question. Is there any fees or charges I'm overlooking using the BOA checks?
Taxes. The interest you pay and the fee are not deductible. Say your marginal rate (federal + state) is 35%. Even if you can get 6.25% for a 10-month CD, your net spread (earnings rate * (1 - tax rate) - loan rate) is 1.07%. If you take out $10k for 10 months and pay a $75 fee, you'll make $14. Not really worth it.
There are some offers out there for 0% BT with $0 transaction fees. A much better deal. I would advise you to go to FatWallet.com and read about this in the finance forum there so you know all the ins and outs before you step into this.
If you do this, absolutely do not use the card for any purchases. Any payments you make are applied to the portions of your balance with the lowest interest rate (meaning the 2.99% portion). So new purchases would stay on there and accumulate interesting at 20% or whatever the current rate. And do not make a late payment. They can instantly hike your rate on everything into default territory (30+%).
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Thanks for the info acf573. The cd I would be getting would be much bigger than $10,000 and I'm retired and not getting social security yet so I'll be in the 19% tax bracket (fed and state). I think I should come out a couple thousand ahead for the 10 month period after the taxes.
I was going to borrow against my existing cd's anyway to get the 6.25% rate now. Using the BOA checks vs the cost of borrowing against the cd's is much cheaper. It's not just the profit I make for the 10 months I'm looking at, I just don't think that rate will be available again for quite a few years and I want to get the money invested for a 5 year period. If the cd rates do go up I'll look foolish for investing the money for that long, but that's the chance you take.
That's good advice about not using the card for anything else. Is there a way I could tell BOA to freeze the card and not allow any more purchases? I'd be worried that if I borrowed my credit line it would be possible for a false charge to be put on the card. I know I could dispute it and get it taken off, but that would cause all sorts of hassles. Also, if I borrowed the credit line would the interest that would be tacked on put me over my limit (thus making me over my line and triggering the 30% interest rate)?
I thought of another question. Seeing there isn't any grace period how do you ever pay the balance off? If I get a statement that says my balance is xx dollars and I send them that amount isn't there more interest accruing from the date of the statement to the date they get the payment? How could you ever pay off the whole balance?
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Interesting timing of this post. I receieved an MBNA/Bank of America card that is doing absolutely nothing; however, offers 0% interest on cash advances for 12 months. I too thought of taking the cash advance and depositing it into my GMAC MM (5.2%) in order to earn the interest. Given a $50K credit line, that would put about $2500 in my pocket.
My question is: How would carrying a $50K balance impact my FICO score?
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Thanks for the info acf573. The cd I would be getting would be much bigger than $10,000 and I'm retired and not getting social security yet so I'll be in the 19% tax bracket (fed and state). I think I should come out a couple thousand ahead for the 10 month period after the taxes.
Let me reiterate that you should go to FatWallet and learn more before you step into this. If you think you can make a couple thousand over 10 months from this, this implies that you're tapping into a $100k+ credit line. All of your questions are likely to have already been answered there (and no, I don't believe there's a way to freeze your card to new purchases).
And I don't really understand what you're planning on doing in 10 months when your 2.99% promo rate ends and all of the money is tied up in a CD. You're much safer matching the maturities of your debt with your assets.
My question is: How would carrying a $50K balance impact my FICO score?
It could impact it a lot. Two important factors are overall credit utilization and highest credit utilization on an account. There are various theories on exactly how big a role these things play (but it's definitely recommended to keep your utilization on any one line below 90%). Again, I would look at FatWallet for more details.
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I'll have other cd's maturing that I can use to pay off the BOA line.
I went to Fatwallet but I couldn't figure out where to look up this topic. Can you narrow it down for me? Thanks.
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Taxes. The interest you pay and the fee are not deductible.
I disagree. If you can establish a reasonable "audit" trail that the money borrowed on the credit card is specifially used to invest in a CD, I think it is well within reason to treat the credit card interest as investment interest expense which is deductible in most cases.
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In response to the OP's question regarding where on Fatwallet to look, search on "AOR" or "balance transfer".
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I never thought about that. If I have BOA wire the money to Pentagon after notifying Pentagon to open a cd with the money I think that would be a reasonable audit trail, wouldn't it?
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I checked with fatwallet and got some good pointers. I called BOA again to try to get the rate lowered. He said the best he could do is extend it for a year. Then he said he noticed I had another credit card from BOA with a high limit also. He combined the two lines and put them on the second card. Then he offered me 1.99% for one year and waived the $75 fee. I can't see any disadvantage of doing this now that the fee is waived, the interest rate is lower, and it appears the interest expense will be tax teductible. I can get the 6.25% three year cd, put the proceeds of the other cd I have maturing in a couple months in Emigrant and make 5.05% on it and withdraw money from Emigrant as needed to make the credit card payments and pay the balance off after one year. This seems too easy.