New Credit Card - Balance Transfer - Stars Aligned Perfectly

[Nifty]

Wow, this turned out better than I had expected so I thought I'd share.

I applied for a new credit card that is tied to my IRA account so I get 2% back on purchases directly to that account. I received my card today and called to activate it.

I got a super nice / smart rep on the phone and we started to talk about the promotions on the card. He noticed that I have 0% interest on balance transfers and cash deposits until 7/2010.

This game is familiar to me. Let's say I transfer $1,000 to the card at 0%. Well, there is a 3% transfer fee, but worse is this:

Any new charges to the card are at the rate of 13%+ and are only paid off AFTER the $1,000 or lower balance is paid off. So, this great sounding "Zero percent" money could end up costing me up to 16% (assuming I charged %1,000 in addition to the $1,000 I transferred).

Well, I did the transfer, and here is how I was able to make it make sense:

1) Brand new card, no charges will be made to it (this is the key to the whole thing)
2) I also get 2% back to my IRA for balance transfers. So, even though I'm paying 3% transfer fee, I'm really only paying 1% for the money!!!
3) Supposedly there is a new law going into effect in Feb. or March that changes the rules so payments go to the higher % debt before the lower % dept. I'm not relying on this, but good to know I could potentially start using this card in 4 months even if the balance is still on there, and not pay huge fees.

So, what do you think? Any holes or potential problems in this logic / process?

 

[FarmerChick]

not bad Nifty!

KEY is like you said...do not charge to the card. These deals are great if you can just use the card as a payoff card.

When I got a 1.99% fixed for life card offer---I transfered everything onto it....and yes, I do not use the card...now I am just finishing off paying off the monies. Good deal for me definitely.

 

[Nifty]

I have a brother that is the master of this and called him about it. He agreed that the two big whammies are:

1) If I charge anything to the card it will be high interest and the last to be paid off.

2) I have to make sure I have the cash on hand by the time the 0% rate expires or I'll be in trouble.

I expect that both of those won't be an issue at all, and I'll enjoy my 1% money for the next 7 months.

BTW, my brother was surprised the "transfer fee" didn't have a cap. Usually the ones he does are like "3% with a max of $100" kinda thing.

 

[enjoy the ride]

Well- you're going to have to 'splain (as Ricky would say to Lucy) more simply-
I think what I read is that you are moving a credit card balance to your new card - they give you 2% into your IRA and your transfer fee is 3% so the cost to you is 1% and you pay no interest on the money until some time next year. You expect that you will pay it off before then and do not plan to use the new card.
Any annual fee?
Basically do you lose the tax deduction for IRA deposits (tradition IRA? as I can't see Roth IRA would allow this) ? Or do the rewards count in your income and need to be listed in your gross income to be later deducted as IRA contributions? Wonder how that works out- I have never had a reward type dredit card.

 

[FarmerChick]

yea I was offered 0% for X months to pay off.

then I got the 1.99 fixed for life.

I jumped on the fixed for life. I could not pay the full balance by X expire date. So yes, be sure you can pay that amt. by end of term allowed for 0%.

 

[Nifty]

Sounds like you're spot on at understanding what I was trying to say!

Here is basically the card I received:
http://personal.fidelity.com/misc/buffers/retirement-rewards-card.shtml.cvsr

 

[FarmerChick]

only thing I noticed is everything is based "on purchase"

and you won't be using this card for purchases "right now" til balance is paid off....then you can take advantage of more benes on this card.

You opened a good card and will be rewarding "later" after you use your 0% good deal and pay off the balance.