Using a Credit card to lower Interest

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From: Robert Longmore


I read recently an artical in the local paper, about using a credit card to lower the interest payments on a mortgage with interest calculated daily and with a no cost redraw facility. hypothetically we have a $200,000 mortgage, and a gold Amex card with a $50,000 limit, and a interest free period of 55 days.
When your monthly repayment falls due, you get a cash advance on the Amex card of $50,000, use this 50K to make the repayment, so now for the next 54 days, you are paying the interest on $150,000 and not the $200,000 and when 54 days have elapsed, you redraw the $50,000 and pay off the card. and so you continue on the cycle. but as stressed by the writer of the story, discipline in adhering to the 55 day period is a must, or cop the cost of 14% interest on 55K.

Does anybody here use this trick to lower interest on the mortgage,? can it be legally done? or is it just an idea by a journo?
 
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Reply: 1
From: Robert Forward


Hi Robert

The problem you will have is that "most" credit cards don't give you the interest free periods on cash withdrawals.

If however, the gold amex does then yep it would be good. But then another problem would arise with a $50k credit card would eat in deeply to your serviceability.

Cheers
Robert

The Sydney "Freestylers" Group Leader.

PS: "Be Not Afraid Of Growing Slowly, Be Afraid Of Only Standing Still."
 
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Reply: 2
From: Rolf Latham


Hi

I think you will find any cash advance on any credit or charge card will incur interest from the day of the charge at somewhere between 7 and 20 %.

Remember that Credit Card Issuers make their $ more so on the vendor fees than the interest charges.

Jouralists should do a little more homework.
Ta

Rolf
 
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Reply: 2.1
From: George M


can i add to that

if you use your keycard to withdraw from your line of credit you will receive the normal bank charges.

however if you take a cash advance on your credit card you pay top interest on the whole balance, check with your bank

revolving lines of credit are good if you are with the card

George
 
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Reply: 3
From: Terry Avery


If Amex offer cash advances interest free then that would be a world first
for a financial company, to give money away free. I think you will find that
interest would be charged on the cash advance and the interest rate on the
Amex card would be higher than on your mortgage. Thus making the plan a no
goer!

If on the other hand Amex do give away large sums of money interest free for
55 days then yes it would work if you were disciplined. Perhaps the person
who wrote the idea is confusing the no annual fee on the card if you take
out a mortgage with interest free periods?

Cheers

Terry
 
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Reply: 3.1
From: Sergey Golovin


I think I have seen that article as well and what they say is - you pay all your shopping with credit card and keep all salary (pay check) as longer as you can on that account to offset the interest rate and then pay off that credit card 3-4 days before it is due. So, effectively you do have your salary siting in your bank account for 50 days minimising the mortgage repayments and then you pay off that credit card “asap”. Make sure it is all clear and paid of 100%, otherwise you have to pay 15% all the time (continuously), no 55 days free, etc.

I agree with Rolf on the point of view that they (banks) will make they money one-way or the other if you borrowed money from them or have any services associated with them.

Also I am not quite sure how it works but let say your mortgage is $200K and then you decided to take credit card out with $5K limit. Bank says that interest rate on the card is only 6% same as home loan. Well, yes, it is true but effectively now you paying 6% on $205K. $200K is your original mortgage + $5K extra for your card. You might not have anything on it but space has been allocated regardless if you are using that space or not. Like car space on sense - once it is allocated it is there regardless if you do have car or you don't.

Well, this is just my gut filling and it is not a scientific analysis at all. I guess what I am trying to say is do your own search.

Serge.
 
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Reply: 3.1.1
From: Anony Mouse


This might be what you mean.
http://www.mortgageaustralia.com.au/HTML/Line%20of%20Credit%20Strategy.htm

"A government that robs Peter to pay Paul can always count on the support of Paul."
Of course, Paul's support is obvious, but it is equally obvious that to rob from Peter to pay Paul will make Peter
very, very angry.
My question is this: "How can you run a good government with a sore Peter?"
 
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Reply: 3.1.1.1
From: Anony Mouse


I should have mentioned, that I disagree
with the concept of using the line of credit for cash withdrawals mentioned in the article. I've found the best method is to say "yes" when asked at the supermarket if you want cash out. This cash then becomes part of the purchase and has up to 55 days period of grace.

"A government that robs Peter to pay Paul can always count on the support of Paul."
Of course, Paul's support is obvious, but it is equally obvious that to rob from Peter to pay Paul will make Peter
very, very angry.
My question is this: "How can you run a good government with a sore Peter?"
 
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Reply: 4
From: LUCJAN ROCZNIAK


This is a multi-part message in MIME format.

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Hi Robert

Taking money from your credit card is a cash advance and you don't get =any interest free days for cash advances you pay interest from day one. =Check with your bank


Luch.
"you only live once"

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Hi Robert

Taking money from your credit card is a cash advance =and you
don't get any interest free days for cash advances you pay interest from =day
one. Check with your bank


Luch.
"you only live once"

------=_NextPart_000_0126_01C1778B.32BB9C00--
 
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Reply: 3.1.1.1.1
From: Land Holdings


Is this true? I'm with a credit union (one of my banks anyway!) and I have debit card in which if I chose credit when I pay at a checkout I don't pay any fees however I can't get any cash out.

I can't see banks letting you have cash for nothing. Could you check just to make sure this is the case with your bank.

LH.
 
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Reply: 3.1.1.1.2
From: Rolf Latham


Hi Anony

Bad news I suspect.

Drawing Cash in any form costs you from the day you draw it:

1. If you have a Line of Credit the cash advance is debited on the day.

2. If you have an offset account and draw money from your savings, you lose that part of the offset from the day the cash is withdrawn

3, Cash Advance on Credit Card - from the day.

Im German and Male so I suppose that sort of predicates me into the "Im often wrong but never in doubt" room :eek:).

Please if anyone has different experience on this please do tell.

tA

Rolf
 
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Reply: 3.1.1.1.2.1
From: Sergey Golovin


I am not exactly sure how do they calculate the interest on it, but I know that if let say you have bought (paid for) something and it did not fit or was wrong shape or colour and you took it back, they might ask you to "resubmit" your card details.
If it is credit card you have to do it because money you have used is borrowed money. But if it is debit card you do not have to submit any more information (do not have to swipe card through the slot again) simply because it is your saved money and you can do what ever you like with it and you can tell'm to get lost or get you the money (refund) back.

Serge.
 
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