Author Topic: DON'T pay off your credit cards club  (Read 7344 times)

Pizzabrewer

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Re: DON'T pay off your credit cards club
« Reply #100 on: June 25, 2018, 03:45:06 PM »
The general principle of borrowing 0% money is simple. You could take the loan, turn it into cash, bury it in your back yard and 15 months later dig it up and repay the loan. You'd be no worse off than before. But as we're smart clever folks we can figure out more profitable ways to use that money, no?  I happen to be at the exact income level that it makes sense to lower our AGI to eliminate our tax. The 0% money allows us to eat and pay our mortgage while we put almost all our pay into retirement accounts.I'm probably an edge case for this particular scenario.  But under any circumstance you can figure out  how to profit from a 0% loan.
« Last Edit: June 25, 2018, 03:51:02 PM by Pizzabrewer »

boarder42

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Re: DON'T pay off your credit cards club
« Reply #101 on: June 25, 2018, 04:51:21 PM »
1. It's not a 0% loan
2. At some point you have to pay them back.

You're just racking up debt unless you somehow have a large increase in income or stop contributions to your retirement accounts.

Youve failed to explain how any of that works. Youre acting like you've found free money that doesn't need to be paid back. At some point you'll have to pay the Piper.
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Pizzabrewer

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Re: DON'T pay off your credit cards club
« Reply #102 on: June 25, 2018, 05:29:34 PM »
1. I've answered this one several times already and don't feel like doing it again.
2. I've never said I thought the cc debt was exempt from being paid back. At the point I can no longer kick the can down the road I'll stop the retirement funding to pay the piper. In the meantime I'll have 2 or 3 years of tax savings in the neighborhood of $6k/year while having front-loaded the retirement accounts.
« Last Edit: June 25, 2018, 05:31:19 PM by Pizzabrewer »

Telecaster

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Re: DON'T pay off your credit cards club
« Reply #103 on: June 25, 2018, 05:32:09 PM »
The general principle of borrowing 0% money is simple. You could take the loan, turn it into cash, bury it in your back yard and 15 months later dig it up and repay the loan. You'd be no worse off than before. But as we're smart clever folks we can figure out more profitable ways to use that money, no?  I happen to be at the exact income level that it makes sense to lower our AGI to eliminate our tax. The 0% money allows us to eat and pay our mortgage while we put almost all our pay into retirement accounts.I'm probably an edge case for this particular scenario.  But under any circumstance you can figure out  how to profit from a 0% loan.

You are putting borrowed to money into your retirement accounts but you are also borrowing from your 401(k)--and that money goes where?     This makes no sense to me.  Borrowing from your 401(k) is almost always a terrible idea.  What would possibly motivate you to borrow from your 401(k)?  That's something you should only do in desperation, and probably not even then. 

As nick663 points out, at 0% you probably don't want to be maxing retirement contributions anyway.  Your tax savings very well could be an illusion. 

I've said before and I'll say it again:  The 0% balance transfers won't last forever.  If the cash was in your backyard you'd be fine.  But it is in your IRAs and your 401(k) (or owed to your 401(k)??).   What's your plan when the gravy train stops?  And it will stop, that part is guaranteed. 


Pizzabrewer

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Re: DON'T pay off your credit cards club
« Reply #104 on: June 25, 2018, 05:46:41 PM »
It wasn't an illusion on our 2017 tax return. It was thousands of cold, hard dollars. Plus the state, which I hadn't originally even considered, sent us an $1100 refund thanks to my tax-lowering strategy.

If you look at my previous post you'll see this isn't a perpetual strategy. 2017 already happened, 2018 for sure, 2019 possibly.

« Last Edit: June 25, 2018, 05:48:38 PM by Pizzabrewer »

boarder42

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Re: DON'T pay off your credit cards club
« Reply #105 on: June 25, 2018, 05:57:29 PM »
You haven't shown any math or actual numbers other than a single year. You haven't shown how you expect to repay this debt.
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nick663

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Re: DON'T pay off your credit cards club
« Reply #106 on: June 25, 2018, 07:41:42 PM »
1. I've answered this one several times already and don't feel like doing it again.
2. I've never said I thought the cc debt was exempt from being paid back. At the point I can no longer kick the can down the road I'll stop the retirement funding to pay the piper. In the meantime I'll have 2 or 3 years of tax savings in the neighborhood of $6k/year while having front-loaded the retirement accounts.
I would love to see a breakdown of how you have 6k/year tax savings while having a total $0 income tax liability.  I don't see how both of those could be true without huge amounts of credit card debt.

2017 tax brackets (married filing jointly):
10%   Up to $18,650
15%   $18,651 - $75,900

For simplicity sake, let's just say you're putting the full 48k (2017 max 401k contributions for you and your wife if 55 and older) on the credit card.  The maximum federal tax impact that could have is 18650*.1+((48,000-18650)*.15)=$6267.5

It wasn't an illusion on our 2017 tax return. It was thousands of cold, hard dollars. Plus the state, which I hadn't originally even considered, sent us an $1100 refund thanks to my tax-lowering strategy.
Just because you saved money doesn't mean it was the best strategy available.  You can "save" 100s of dollars every time you go into Kohl's but you probably could have gotten every item cheaper elsewhere.
« Last Edit: June 25, 2018, 07:46:38 PM by nick663 »

Toad

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Re: DON'T pay off your credit cards club
« Reply #107 on: June 25, 2018, 10:15:18 PM »
You can "save" 100s of dollars every time you go into Kohl's but you probably could have gotten every item cheaper elsewhere.

I disagree with this completely.  Kohl's is pretty solid.  About 3 years back, my fiancče needed some t-shirts.  It was winter and we were at Kohl's.  We went through the clearance racks and found 10 or so shirts that she was able to get for less than $3 each (many were $1.xx) after the clearance discount stacked with our 30% off.  They were solid shirts too...Frozen and other various Disney/character branded shirts.  Even the check out person was like...whaaa??!?!! when she rung up our stuff.

So don't tell me Kohl's is a rip off... blasphemy I tell you!  10 shirts for ~$20...you would have a hard time beating that at Goodwill! (Disclaimer - I can't back that statement up since I have never actually shopped for shirts at Goodwill).

talltexan

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Re: DON'T pay off your credit cards club
« Reply #108 on: June 27, 2018, 08:11:01 AM »
It seems as though Pizzabrewer is advocating:

  • owning your assets earlier, and
  • reducing tax liability now.

The issue with #1 is simply price. I disagree that a weak economy would cause the ability to find cheap credit card space to dry up. I think the opposite would happen: a strong economy--with higher inflation--will change the effective cost of borrowing from 3% to 5%-9%.

With regard to reducing tax liability now, a massive upward tax increase between now a retirement could affect that. Republicans are in power today, but during the course of a multi-decade period, there's bound to be a backlash that provokes right-sizing Social Security via new revenue.
 

boarder42

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Re: DON'T pay off your credit cards club
« Reply #109 on: June 27, 2018, 08:35:24 AM »
but he doesnt own his assets he's borrowing against them.

at some point the money has to be paid.  and if you're getting to 0 income tax then you're sacraficing 12% and 10% tax dollars at the sake of 22% tax dollars or higher in the future.
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Telecaster

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Re: DON'T pay off your credit cards club
« Reply #110 on: June 27, 2018, 11:52:36 AM »
It seems as though Pizzabrewer is advocating:

  • owning your assets earlier, and
  • reducing tax liability now.

The issue with #1 is simply price. I disagree that a weak economy would cause the ability to find cheap credit card space to dry up. I think the opposite would happen: a strong economy--with higher inflation--will change the effective cost of borrowing from 3% to 5%-9%.

With regard to reducing tax liability now, a massive upward tax increase between now a retirement could affect that. Republicans are in power today, but during the course of a multi-decade period, there's bound to be a backlash that provokes right-sizing Social Security via new revenue.

Indeed, interest rates tend to decline as the economy weakens.  But I'm talking about the availability of credit, which also declines when the economy weakens.   Banks simply don't like to lend money in weak economies and go into self-preservation mode instead.   We saw that in spades beginning in 2008 and the next few years when even secured loans were hard to get, regardless of credit.   Right now those 0% teaser rates are plentiful but when economy weakens, those will vanish just like they did in 2008.  When that happens, all that 0% debt will become 28% (or whatever the credit card interest is).   Because the money is either in retirement accounts or has been spent on every day expenses, the OP cannot pay off that high interest debt all at once.  Or at least can't do it without withdrawal penalties.  He did mention when he can't get the teaser rates anymore he intends to pay off the loans by reducing his retirement contributions.  That implies he intends to pay off the unsecured debt over time.  At 28% that might be painful.  And of course, reducing retirement contributions means higher tax rates in the future too.

I also agree that lowering your tax burden right now is generally good policy (a bird in the hand and all that).   But as nick663 points out, the benefits are pretty marginal once you get below about 10% tax bracket because you'll be withdrawing  at ordinary income rates, instead of the more favorable capital gains rates.  Again, bird in the hand, so maybe it is a wash.   But it certainly seems prudent to at least do the calculation instead of just guessing. 

Also, the OP is also borrowing heavily against his 401(k) for reason ($30,000, I believe).   For one, there is the opportunity cost because you aren't participating in the market while the money withdrawn.  That cost is hard to account for, but should be considered.    But another problem is that interest on the 401(k) is paid with after-tax dollars, but goes into the 401(k) where it is taxed again at the time of withdrawal.   The OP is definitely not including that double taxation cost. 

And there is the risk of job loss. No one expects to lose their job, but I've seen some strange things happen in the employment world and those things can happen out of the blue.   In that event, 401(k) loans typically have to be paid back fairly quickly.    Where will that money come from? 

I see some potential time bombs with this approach. 

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Re: DON'T pay off your credit cards club
« Reply #111 on: June 28, 2018, 09:01:37 AM »
PB the thing that we are all responding to that we don't see accounted for here is risk.  You speak of "kicking the can down the road" and paying off the debt eventually. The big risk is how big the debt will be, when you will be called to account, and the conditions you'll be operating under when its time to pay it off.   It just seems a lot easier to live on less than what you make and save the difference.

tomsang

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Re: DON'T pay off your credit cards club
« Reply #112 on: July 09, 2018, 12:31:37 AM »
For those that are not maximizing their 401k contribution, they should be getting a 401k loan and increasing their 401k contribution.  This is a no brainer, especially if you are in a higher tax bracket.

For others, if you can't find investment opportunities that pay great than 10%, then you are not trying very hard.  Taking advantage of 3% zero interest 18 month loans is a windfall.

I get multiple opportunities per month to invest in opportunities that pay out 20% or more per year.  Figuring the highest ROI is the hardest part.  Most are very positive.

This past month, I have an opportunity to invest $75k and be paid back within 2 years at $195k.  This is not unusual if you are looking out for investments.  Credit card advances, 401k loans, LOC, and other debt can turbo charge your FIRE date if used smartly.  In some cases, I don't hit my projected return, but I have never hit less than a 10% return on my investment. 

There are so many friends, family, acquaintances, and others that want people to invest or buy their property that it is ridiculous to think that you can borrow for 3% and get 10%++ year after year.

boarder42

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Re: DON'T pay off your credit cards club
« Reply #113 on: July 09, 2018, 06:46:26 AM »
For those that are not maximizing their 401k contribution, they should be getting a 401k loan and increasing their 401k contribution.  This is a no brainer, especially if you are in a higher tax bracket.

For others, if you can't find investment opportunities that pay great than 10%, then you are not trying very hard.  Taking advantage of 3% zero interest 18 month loans is a windfall.

I get multiple opportunities per month to invest in opportunities that pay out 20% or more per year.  Figuring the highest ROI is the hardest part.  Most are very positive.

This past month, I have an opportunity to invest $75k and be paid back within 2 years at $195k.  This is not unusual if you are looking out for investments.  Credit card advances, 401k loans, LOC, and other debt can turbo charge your FIRE date if used smartly.  In some cases, I don't hit my projected return, but I have never hit less than a 10% return on my investment. 

There are so many friends, family, acquaintances, and others that want people to invest or buy their property that it is ridiculous to think that you can borrow for 3% and get 10%++ year after year.

if you're in a higher tax bracket you should be able to max your 401k without a loan. 

i'm more interested in your 75k - 195k what is this opportunity and how it is rock solid b/c if those were easily available everyone would jump on them.
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Pizzabrewer

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Re: DON'T pay off your credit cards club
« Reply #114 on: July 09, 2018, 06:54:23 AM »

All right, someone who "gets it".

Even without your ability to find good investments, the 0% money is a no-brainer.  I've already turned it into one $150 Discover savings bonus and another $150 pending (didn't have time to turn the money around often enough for the $200 bonuses).  So the 3% is now down to 0.5%.  With the next bonus I'll be in positive territory.

boarder42

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Re: DON'T pay off your credit cards club
« Reply #115 on: July 09, 2018, 06:57:01 AM »

All right, someone who "gets it".

Even without your ability to find good investments, the 0% money is a no-brainer.  I've already turned it into one $150 Discover savings bonus and another $150 pending (didn't have time to turn the money around often enough for the $200 bonuses).  So the 3% is now down to 0.5%.  With the next bonus I'll be in positive territory.

you're not in a higher tax bracket you're getting your taxes to 0.  Selectively choosing words with out the classifiers doesnt help you.  you dont fit either of the situations Tomsang proposed.
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secondcor521

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Re: DON'T pay off your credit cards club
« Reply #116 on: July 09, 2018, 08:36:54 AM »
For those that are not maximizing their 401k contribution, they should be getting a 401k loan and increasing their 401k contribution.  This is a no brainer, especially if you are in a higher tax bracket.

For others, if you can't find investment opportunities that pay great than 10%, then you are not trying very hard.  Taking advantage of 3% zero interest 18 month loans is a windfall.

I get multiple opportunities per month to invest in opportunities that pay out 20% or more per year.  Figuring the highest ROI is the hardest part.  Most are very positive.

This past month, I have an opportunity to invest $75k and be paid back within 2 years at $195k.  This is not unusual if you are looking out for investments.  Credit card advances, 401k loans, LOC, and other debt can turbo charge your FIRE date if used smartly.  In some cases, I don't hit my projected return, but I have never hit less than a 10% return on my investment. 

There are so many friends, family, acquaintances, and others that want people to invest or buy their property that it is ridiculous to think that you can borrow for 3% and get 10%++ year after year.

if you're in a higher tax bracket you should be able to max your 401k without a loan. 

i'm more interested in your 75k - 195k what is this opportunity and how it is rock solid b/c if those were easily available everyone would jump on them.

Sounds like hard money lending to me, which is not low risk despite tomsang's experience.  I'm not sure if he's gotten lucky or is good or not done it long enough to get bitten or what.
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tomsang

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Re: DON'T pay off your credit cards club
« Reply #117 on: July 09, 2018, 11:19:18 AM »
i'm more interested in your 75k - 195k what is this opportunity and how it is rock solid b/c if those were easily available everyone would jump on them.

You are right.  Most of the opportunities that I invest in relate to something that I have knowledge about.  Many of the opportunities are there because I have specific knowledge and access to immediate capital(Credit Cards, LOC, Savings, etc.)

Smaller ones:
IE people don't like storing a 17 foot kayak in their garage all winter.  You can buy a good used one for $500-$600 in December and sell it for $800-$1,200 in May.  Found out because I wanted a kayak, bought one in November, played with it over the winter, sold it for a profit.  These type of opportunities are all over the place.  If you have a passion for something, then you should be able to spot a bargain, when to buy, when to sell, etc.  Power tools are another one that clog up garages.  Small dollar, small risk.

Concert tickets to my favorite band. Buy four at pre-sale hoping friends could come.  Sold out in minutes.  Some times friends are not interested attending.  Sell the tickets for double; pays for our tickets and dinner.  I have done this a dozen times over the years not as an investment, but desire to have friends join us.  We tend to go to a half a dozen or so concerts a year with friends if you are all wondering why we can't find a friend :)  The knowledge that the worst case scenario is that we resell the tickets for a profit has given me the confidence to buy extra tickets.  Obviously, people make a living out of scalping tickets. 

Store closing out something that is valuable at 90% off.  Buy and sell online.  There are people that do this for a six figure living.  I have not done much of this.

Larger ones:

Bought a for sale by owner rental house for $150k below market(Knew the market for a view house-Zillow did not understand the contours of the land).  Since then it has doubled in price.  $75k down-payment after all fees during closing would net me $450k profit six years later.  When opportunity came about we had less than $1k in our checking/savings accounts.  Credit card, 401k loans were used if I recall.

Bought a semi passive operating business that was consistently making $65k a year for the prior five years for $35k(Owners were passive and wanted to retire).  That was five years ago. So over 10 year track record of making $65kish.  Requires 5-10 hours a week of oversight.  If someone spent 20+ hours it would generate $100k or more.

This latest opportunity is a tuck in acquisition for another passive business.  First position money return is return of the $75k capital + $90k profit within two years.  The other $105k profit, is if the entity hits the very conservative projections that we have established.  We have done three other acquisitions similar to this meeting our projections. We have more conservative projections on this one, so the upside here is much greater than $195k profit as listed in the previous post. LOC used for this one.

Friend grew up in a poor part of the state:  He lives on the opposite side of the state now, but he visits family/friends often. He is an engineer, but has learned about real estate and timber based on opportunities.  On a very regular basis someone in his hometown is desperate for money but they have 20+ acres that has some timber on it. In most situations he can purchase the land, thin the timber and sell it for more than what he paid for the land.  I think he said he is up to 1,200 acres or something.  He is doing much bigger deals now that he has the knowledge and capital.  People call him out of the blue throughout the year.  He has conservatively made millions as a side hobby.  Those selling are desperate, don't know the value of the timber, and are too lazy to hire someone to appraise the timber and land.   

The point is that there are tons of opportunities out there.  If you live in an area where people are bad with money, uneducated, lazy or want to retire somewhere else then these types of transactions can be had on a daily basis.  They can be as small as buying an extra set of tickets to your favorite band that sells out immediately, waiting six months then selling them closer to the concert date to someone who did not plan ahead, or as large as investing in something that you know a lot about.

Is there risk? Yes.  Can the risk be minimized for huge gains, Yes!  Usually these windfalls are the result of curiosity and education.  There are tons of people that don't want to jump through some perceived huge hoop, when it is pretty straightforward and simple if you have the knowledge.  Start small and build your way up.   

boarder42

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Re: DON'T pay off your credit cards club
« Reply #118 on: July 09, 2018, 12:53:50 PM »
yeah what you're describing is completely different than what the OP is doing.  you're using smart leverage to invest in an opportunity when it comes up many of the things you do are things i do.  using 0% interest credit cards to max a 401k and get your taxable income to 0 i still have yet to see a benefit of.  and thats what this thread is about.  at some point you have to pay the piper.  and you'll be doing so at a higher tax rate.
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Pizzabrewer

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Re: DON'T pay off your credit cards club
« Reply #119 on: July 09, 2018, 01:25:12 PM »
yeah what you're describing is completely different than what the OP is doing.  you're using smart leverage to invest in an opportunity when it comes up many of the things you do are things i do.  using 0% interest credit cards to max a 401k and get your taxable income to 0 i still have yet to see a benefit of.  and thats what this thread is about.  at some point you have to pay the piper.  and you'll be doing so at a higher tax rate.

You are a hard nut, aren't you?  That's not at all what this thread is about.

It's about the fact, that despite all the (well-deserved) hatred for cc companies, if you're smart you can borrow money from them for free.

What you do with it is secondary. Clearly tomsang has mastered the art. That's what I was hoping to get from posting this thread, useful and creative ideas. Instead it's turned into you dumping on me every chance you get.

Give it a rest.

boarder42

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Re: DON'T pay off your credit cards club
« Reply #120 on: July 09, 2018, 01:35:30 PM »
yeah what you're describing is completely different than what the OP is doing.  you're using smart leverage to invest in an opportunity when it comes up many of the things you do are things i do.  using 0% interest credit cards to max a 401k and get your taxable income to 0 i still have yet to see a benefit of.  and thats what this thread is about.  at some point you have to pay the piper.  and you'll be doing so at a higher tax rate.

You are a hard nut, aren't you?  That's not at all what this thread is about.

It's about the fact, that despite all the (well-deserved) hatred for cc companies, if you're smart you can borrow money from them for free.

What you do with it is secondary. Clearly tomsang has mastered the art. That's what I was hoping to get from posting this thread, useful and creative ideas. Instead it's turned into you dumping on me every chance you get.

Give it a rest.

b/c what you're doing with the money isnt actually benefitting you and you'd rather put blinders on and cherry pick the posts that remotely mention something positive rather than put pen to paper and see the likely HIGH damage you're actually doing to your long term financial situation - you havent answered a single fucking question about your exit strategy or shown actual numbers to how taking 401k loans to max a 401k at a 0% tax rate while compounding 3% interest on "0%" balance transfers on credit cards actually doesnt cause harm.

you've shown a vacuum of one year

like if i went out today and ran up 2MM in credit card debt at 0% and invested it and said look i can retire check out this awesome amount of money i've got invested.  I'm not going to give it a rest b/c what you're doing with your 0% 3% interest isnt beneficial to you long term its most likely determental.

so if you'd like me to stop dumping on you please post long term numbers and your strategy for how these 401k loans to invest in your 401k at a 0% tax rate and 3% credit card interest hacks are going to play out over the next 20 years.  not the stupid shit you're attempting to do now and talking about a single year. b/c i and many others here are quite positive you havent looked at this. 
« Last Edit: July 09, 2018, 01:38:11 PM by boarder42 »
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Pizzabrewer

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Re: DON'T pay off your credit cards club
« Reply #121 on: July 09, 2018, 01:53:03 PM »
Dude. I've addressed all your concerns but you clearly don't listen.

If saving $1000s in taxes while hypercharging our retirement accounts doesn't sound smart to you then I don't know what else to say.

Yes I understand the risks and implications of what I'm doing.

Give it a rest.

Telecaster

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Re: DON'T pay off your credit cards club
« Reply #122 on: July 09, 2018, 02:05:27 PM »
You are a hard nut, aren't you?  That's not at all what this thread is about.

It's about the fact, that despite all the (well-deserved) hatred for cc companies, if you're smart you can borrow money from them for free.

What you do with it is secondary. Clearly tomsang has mastered the art. That's what I was hoping to get from posting this thread, useful and creative ideas. Instead it's turned into you dumping on me every chance you get.

Give it a rest.

Everyone is in favor of zero interest loans.  What you do with it though, is by far the very most important thing.   tomsang, for example, is doing the temporal arbitrage thing with concert tickets and the kayak.   I understand people do that with convertibles and motorcycles as well.   In fact, I was kind of inspired by the kayak story.   My next door neighbor kayaks about three times a week all year round.  I could get one in the fall, and if I didn't like it/use it, I could just sell it in the spring.  Got me thinking enough that I spent a few minutes on Craigslist today.   Maybe make a couple bucks, and zero interest is all the better. 

However, you used your zero interest loans for normal consumer spending, not for investing.   You don't have the option of making money selling the metaphorical kayak and making a couple extra bucks.   You just have a pile of credit card debt sitting there like a time bomb waiting to go off and no strategy (that you've shared) how you plan to retire that debt.   That sounds really scary to me.

Another thing that I truly cannot comprehend is why you are borrowing money to max your 401(k)s, and then borrowing that money back from your 401(k).     A 401(k) loan is one of the worst financial mistakes you can make.   Something that only should be done in a hair on fire emergency and maybe not even then.   You are taking a blowtorch to your financial future with this scheme. 

You've made up your mind that this is "genius," and that's fine with me.  I'm just here to point out the horrific financial consequences of what you are doing just in case someone is reading along and considers doing the same thing.   




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Re: DON'T pay off your credit cards club
« Reply #123 on: July 09, 2018, 02:11:19 PM »
Dude. I've addressed all your concerns but you clearly don't listen.

If saving $1000s in taxes while hypercharging our retirement accounts doesn't sound smart to you then I don't know what else to say.

Yes I understand the risks and implications of what I'm doing.

Give it a rest.

you've saved "1000's" in taxes THIS year at the sacrafice of FUTURE years and if youre at 0 taxes then you're actually really hurting yourself b/c its better to pay some tax now at 10% and probably 12% than the 22%+ you'll be paying in the future.

please point out where you have once addressed future implications of what you're doing b/c you havent b/c you cant see past 2018 tax year.
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boarder42

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Re: DON'T pay off your credit cards club
« Reply #124 on: July 09, 2018, 02:13:32 PM »
You are a hard nut, aren't you?  That's not at all what this thread is about.

It's about the fact, that despite all the (well-deserved) hatred for cc companies, if you're smart you can borrow money from them for free.

What you do with it is secondary. Clearly tomsang has mastered the art. That's what I was hoping to get from posting this thread, useful and creative ideas. Instead it's turned into you dumping on me every chance you get.

Give it a rest.

You've made up your mind that this is "genius," and that's fine with me.  I'm just here to point out the horrific financial consequences of what you are doing just in case someone is reading along and considers doing the same thing.


yep while i'll never quit posting here.
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Pizzabrewer

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Re: DON'T pay off your credit cards club
« Reply #125 on: July 09, 2018, 02:44:25 PM »
You are a hard nut, aren't you?  That's not at all what this thread is about.

It's about the fact, that despite all the (well-deserved) hatred for cc companies, if you're smart you can borrow money from them for free.

What you do with it is secondary. Clearly tomsang has mastered the art. That's what I was hoping to get from posting this thread, useful and creative ideas. Instead it's turned into you dumping on me every chance you get.

Give it a rest.

You've made up your mind that this is "genius," and that's fine with me.  I'm just here to point out the horrific financial consequences of what you are doing just in case someone is reading along and considers doing the same thing.


yep while i'll never quit posting here.

Well the simple fact you keep throwing "3%" at me shows you haven't read or comprehended what I've said. 

Telecaster

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Re: DON'T pay off your credit cards club
« Reply #126 on: July 09, 2018, 03:59:21 PM »
Well the simple fact you keep throwing "3%" at me shows you haven't read or comprehended what I've said.

Or you are not explaining it properly.  Here's one part I need some clarification on: 


I just got some "checks" in the mail from Barclays to access the credit limit on my card.  3% fee up front, 0% interest on the balance until 9/1/2019.

I'm looking at a multi-tiered approach to this.  Write a check to myself for $12k.  Pay off the 401k loan we have against my wife's account (about $10k).  Take out a new 401k loan for ~$30k.

If you have a 3% fee, then your costs are 3%.  Now, you might be able to use that money to make more than 3% then more power to you.  But you still have to include the fee when calculating your costs, otherwise your numbers won't make sense.

You also need to include the opportunity costs of the 401(K) loans.  You are borrowing against your credit cards to get the tax break now (fair enough, but hold that thought), but then borrowing against the 401(k), so you not only miss out on the market returns (not good), you also lose the tax break on the dollars you use to pay off the loan (really not good). 

And of course the money is taxed when it comes out, so you are being taxed on the original money you borrowed to contribute to the 401(k) in the first place.  Being taxed on borrowed money is officially Not Good.

And at your tax bracket, it isn't clear to me that maxing out your 401(k) makes financial sense anyway.  You very likely financially better off just paying the long term capital gains taxes.  Which for you (and for me) would likely be zero.  So you are paying 3% which allows you to pay zero tax now in order to avoid paying 0% in taxes in the future.   That doesn't look good from here. 

Again, not posting for you.  But if there is a noob who comes across this, they'll know enough to run screaming away from schemes like this one.  Or at least know the questions to ask. 

boarder42

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Re: DON'T pay off your credit cards club
« Reply #127 on: July 09, 2018, 04:36:31 PM »
You are a hard nut, aren't you?  That's not at all what this thread is about.

It's about the fact, that despite all the (well-deserved) hatred for cc companies, if you're smart you can borrow money from them for free.

What you do with it is secondary. Clearly tomsang has mastered the art. That's what I was hoping to get from posting this thread, useful and creative ideas. Instead it's turned into you dumping on me every chance you get.

Give it a rest.

You've made up your mind that this is "genius," and that's fine with me.  I'm just here to point out the horrific financial consequences of what you are doing just in case someone is reading along and considers doing the same thing.


yep while i'll never quit posting here.

Well the simple fact you keep throwing "3%" at me shows you haven't read or comprehended what I've said.

See post above where you said 3%. Man it's tough to make things up when you state them yourself then call it 0% the rest of the post.  So it's clear you're not running numbers.
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Re: DON'T pay off your credit cards club
« Reply #128 on: July 10, 2018, 07:51:46 AM »
I am confused. Why is this better than the usual sign up bonus chasing? Suppose you get the US Bank card that returns 300 dollars cash plus a percentage after $2000 dollars spend. Does this not give a larger return on your money in a shorter time with less risk? Borrowing at 0% and then accepting market risk or very low 2% safe return seems worse to me.

peregrine

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Re: DON'T pay off your credit cards club
« Reply #129 on: July 10, 2018, 09:07:38 AM »
Yes, pizzzabrewer, I have to agree with above posts:  Seeing actual numbers would be beneficial here.  I am interested in thinking more about your argument for using 0% APRs, but I see too much risk to justify it. 

If I'm missing something, I'd like to see it.  Comprehensive numerical data, please?

Thanks very much.
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Re: DON'T pay off your credit cards club
« Reply #130 on: July 10, 2018, 09:22:46 AM »
I am confused. Why is this better than the usual sign up bonus chasing? Suppose you get the US Bank card that returns 300 dollars cash plus a percentage after $2000 dollars spend. Does this not give a larger return on your money in a shorter time with less risk? Borrowing at 0% and then accepting market risk or very low 2% safe return seems worse to me.

The only benefit I can think of is that you can do it without actually having the money saved up to get the savings bonuses.  (e.g. $300 bonus for opening Chase savings account with $15,000 deposit)

v8rx7guy

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Re: DON'T pay off your credit cards club
« Reply #131 on: July 10, 2018, 09:23:24 AM »
Yes, pizzzabrewer, I have to agree with above posts:  Seeing actual numbers would be beneficial here.  I am interested in thinking more about your argument for using 0% APRs, but I see too much risk to justify it. 

If I'm missing something, I'd like to see it.  Comprehensive numerical data, please?

Thanks very much.

Why would you need actual numbers?  It's genius.

\sarcasm

boarder42

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Re: DON'T pay off your credit cards club
« Reply #132 on: July 10, 2018, 09:34:29 AM »
I am confused. Why is this better than the usual sign up bonus chasing? Suppose you get the US Bank card that returns 300 dollars cash plus a percentage after $2000 dollars spend. Does this not give a larger return on your money in a shorter time with less risk? Borrowing at 0% and then accepting market risk or very low 2% safe return seems worse to me.

The only benefit I can think of is that you can do it without actually having the money saved up to get the savings bonuses.  (e.g. $300 bonus for opening Chase savings account with $15,000 deposit)

300/15k is 2% if you're borrowing at 3% (this is a cost no matter how much the OP wants to ignore it) then you're making LOSING 1% doing this.  i can MS on cards for better returns with little to no risk to me.

sorry i made a fatal error here this actually loses you 1% it doesnt make you shit. 
« Last Edit: July 10, 2018, 11:53:25 AM by boarder42 »
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v8rx7guy

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Re: DON'T pay off your credit cards club
« Reply #133 on: July 10, 2018, 10:04:43 AM »
I am confused. Why is this better than the usual sign up bonus chasing? Suppose you get the US Bank card that returns 300 dollars cash plus a percentage after $2000 dollars spend. Does this not give a larger return on your money in a shorter time with less risk? Borrowing at 0% and then accepting market risk or very low 2% safe return seems worse to me.

The only benefit I can think of is that you can do it without actually having the money saved up to get the savings bonuses.  (e.g. $300 bonus for opening Chase savings account with $15,000 deposit)

300/15k is 2% if you're borrowing at 3% (this is a cost no matter how much the OP wants to ignore it) then you're making 1% doing this.  i can MS on cards for better returns with little to no risk to me.

Agree 100%... not defending it in any way, shape or form.  Just pointing out that is why he is borrowing money to churn bank accounts... OP doesn't have it saved up.

Radagast

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Re: DON'T pay off your credit cards club
« Reply #134 on: July 10, 2018, 10:33:27 AM »
I am confused. Why is this better than the usual sign up bonus chasing? Suppose you get the US Bank card that returns 300 dollars cash plus a percentage after $2000 dollars spend. Does this not give a larger return on your money in a shorter time with less risk? Borrowing at 0% and then accepting market risk or very low 2% safe return seems worse to me.

The only benefit I can think of is that you can do it without actually having the money saved up to get the savings bonuses.  (e.g. $300 bonus for opening Chase savings account with $15,000 deposit)

300/15k is 2% if you're borrowing at 3% (this is a cost no matter how much the OP wants to ignore it) then you're making 1% doing this.  i can MS on cards for better returns with little to no risk to me.

Agree 100%... not defending it in any way, shape or form.  Just pointing out that is why he is borrowing money to churn bank accounts... OP doesn't have it saved up.
I should have been more clear... that is a credit card sign up bonus I am referring to. Why is 0% for 15 months on a credit card better than getting a similar (and usually larger) bonus directly from a credit card sign up bonus, with less work to boot? It seems there would also be less risk and your credit score would be higher.

v8rx7guy

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Re: DON'T pay off your credit cards club
« Reply #135 on: July 10, 2018, 10:39:37 AM »
I am confused. Why is this better than the usual sign up bonus chasing? Suppose you get the US Bank card that returns 300 dollars cash plus a percentage after $2000 dollars spend. Does this not give a larger return on your money in a shorter time with less risk? Borrowing at 0% and then accepting market risk or very low 2% safe return seems worse to me.

The only benefit I can think of is that you can do it without actually having the money saved up to get the savings bonuses.  (e.g. $300 bonus for opening Chase savings account with $15,000 deposit)

300/15k is 2% if you're borrowing at 3% (this is a cost no matter how much the OP wants to ignore it) then you're making 1% doing this.  i can MS on cards for better returns with little to no risk to me.

Agree 100%... not defending it in any way, shape or form.  Just pointing out that is why he is borrowing money to churn bank accounts... OP doesn't have it saved up.
I should have been more clear... that is a credit card sign up bonus I am referring to. Why is 0% for 15 months on a credit card better than getting a similar (and usually larger) bonus directly from a credit card sign up bonus, with less work to boot? It seems there would also be less risk and your credit score would be higher.

Yeah, I can't figure that out either.

Toad

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Re: DON'T pay off your credit cards club
« Reply #136 on: July 10, 2018, 11:53:32 AM »
I should have been more clear... that is a credit card sign up bonus I am referring to. Why is 0% for 15 months on a credit card better than getting a similar (and usually larger) bonus directly from a credit card sign up bonus, with less work to boot? It seems there would also be less risk and your credit score would be higher.

Yeah, I can't figure that out either.

Sometimes you can eat your cake and have it too.  Chase Ink Cash --> 50k UR points, 0% for 15 months, a business card.  I have some credit I can float right now that won't impact my credit score for 0%, but I didn't sign up for the card for that reason...just saying.
« Last Edit: July 10, 2018, 11:59:04 AM by Toad »

nick663

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Re: DON'T pay off your credit cards club
« Reply #137 on: July 10, 2018, 12:15:47 PM »
I am confused. Why is this better than the usual sign up bonus chasing? Suppose you get the US Bank card that returns 300 dollars cash plus a percentage after $2000 dollars spend. Does this not give a larger return on your money in a shorter time with less risk? Borrowing at 0% and then accepting market risk or very low 2% safe return seems worse to me.

The only benefit I can think of is that you can do it without actually having the money saved up to get the savings bonuses.  (e.g. $300 bonus for opening Chase savings account with $15,000 deposit)

300/15k is 2% if you're borrowing at 3% (this is a cost no matter how much the OP wants to ignore it) then you're making LOSING 1% doing this.  i can MS on cards for better returns with little to no risk to me.

sorry i made a fatal error here this actually loses you 1% it doesnt make you shit.
It takes ~90 days to earn that bonus on a Chase account so you could repeat this 3-4x a year with various bank signup offers.

boarder42

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Re: DON'T pay off your credit cards club
« Reply #138 on: July 10, 2018, 12:59:47 PM »
I am confused. Why is this better than the usual sign up bonus chasing? Suppose you get the US Bank card that returns 300 dollars cash plus a percentage after $2000 dollars spend. Does this not give a larger return on your money in a shorter time with less risk? Borrowing at 0% and then accepting market risk or very low 2% safe return seems worse to me.

The only benefit I can think of is that you can do it without actually having the money saved up to get the savings bonuses.  (e.g. $300 bonus for opening Chase savings account with $15,000 deposit)

300/15k is 2% if you're borrowing at 3% (this is a cost no matter how much the OP wants to ignore it) then you're making LOSING 1% doing this.  i can MS on cards for better returns with little to no risk to me.

sorry i made a fatal error here this actually loses you 1% it doesnt make you shit.
It takes ~90 days to earn that bonus on a Chase account so you could repeat this 3-4x a year with various bank signup offers.

so now not only do you need the credit card 0% balance transfers to stay in place you must have mulitple different banks to sign up with over a one year period - i assume these can just be churned as easily as a credit card either.  stepping over dollars to pick up pennies.  and increasing risk is all i really see here.
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nick663

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Re: DON'T pay off your credit cards club
« Reply #139 on: July 10, 2018, 04:21:31 PM »
I am confused. Why is this better than the usual sign up bonus chasing? Suppose you get the US Bank card that returns 300 dollars cash plus a percentage after $2000 dollars spend. Does this not give a larger return on your money in a shorter time with less risk? Borrowing at 0% and then accepting market risk or very low 2% safe return seems worse to me.

The only benefit I can think of is that you can do it without actually having the money saved up to get the savings bonuses.  (e.g. $300 bonus for opening Chase savings account with $15,000 deposit)

300/15k is 2% if you're borrowing at 3% (this is a cost no matter how much the OP wants to ignore it) then you're making LOSING 1% doing this.  i can MS on cards for better returns with little to no risk to me.

sorry i made a fatal error here this actually loses you 1% it doesnt make you shit.
It takes ~90 days to earn that bonus on a Chase account so you could repeat this 3-4x a year with various bank signup offers.

so now not only do you need the credit card 0% balance transfers to stay in place you must have mulitple different banks to sign up with over a one year period - i assume these can just be churned as easily as a credit card either.  stepping over dollars to pick up pennies.  and increasing risk is all i really see here.
Agree completely that it's not the optimal method (you could make more on a single CC sign up bonus).  I was just pointing out that it is possible to turn a small profit doing it instead of being in the red.

Pizzabrewer

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Re: DON'T pay off your credit cards club
« Reply #140 on: July 10, 2018, 04:31:07 PM »
Sigh.  Y'all's reading comprehension is poor.

As I've already stated I have already turned this cash into 2 x $150 Discover savings bonuses.  They're fast.  Days.  One more from any bank (even with a 3 month hold) and the 3% is more than covered.  But by all means keep hammering at me that it's costing me 3%.

Also, y'all keep ignoring the big payoff:  tax savingsTAX SAVINGS. The whole fucking point.  Boarder keeps harping that I'm trading 10 or 12% tax rate for 22% tax rate in the future.  Sorry, but I'm not in your tax bracket/earning power and likely won't be in the future.  We are lower income than most of you high-fliers. I'm trading 10 or 12% tax rate for 0% in current years. 22% ain't in our cards.  The saver's credit is a big inflection point that is relevant to someone at my earning level.  Hitting that alone is worth about $1600 in tax savings.  So no, nick663, one cc bonus is not a better deal.

But we keep going around in circles with you guys harping on the same points that I keep answering.  I think I'm done here unless this thread gets back on track:  creative ways to leverage 0% money.
« Last Edit: July 10, 2018, 04:46:00 PM by Pizzabrewer »

boarder42

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Re: DON'T pay off your credit cards club
« Reply #141 on: July 10, 2018, 05:01:27 PM »
Sigh.  Y'all's reading comprehension is poor.

As I've already stated I have already turned this cash into 2 x $150 Discover savings bonuses.  They're fast.  Days.  One more from any bank (even with a 3 month hold) and the 3% is more than covered.  But by all means keep hammering at me that it's costing me 3%.

Also, y'all keep ignoring the big payoff:  tax savingsTAX SAVINGS. The whole fucking point.  Boarder keeps harping that I'm trading 10 or 12% tax rate for 22% tax rate in the future.  Sorry, but I'm not in your tax bracket/earning power and likely won't be in the future.  We are lower income than most of you high-fliers. I'm trading 10 or 12% tax rate for 0% in current years. 22% ain't in our cards.  The saver's credit is a big inflection point that is relevant to someone at my earning level.  Hitting that alone is worth about $1600 in tax savings.  So no, nick663, one cc bonus is not a better deal.

But we keep going around in circles with you guys harping on the same points that I keep answering.  I think I'm done here unless this thread gets back on track:  creative ways to leverage 0% money.

1. You don't have 0% money
2. Youve still shown no math

Putting things in all caps doesn't actually make them more true.

You're repeating yourself bc you have not answered the basic question that's been asked. It's like if I asked you to show me a rock and you're like here's a cucumber I don't get what you don't understand. It's a fucking CUCUMBER.

Then you move on to insulting our intelligence.
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Re: DON'T pay off your credit cards club
« Reply #142 on: July 10, 2018, 05:06:34 PM »
There are multiple readers on this thread who genuinely want(ed) to understand what you are proposing, pizzabrewer.  When so many people fail to understand your intent, it may be that your presentation method is still unclear and/or your information provided is still incomplete.

And resorting to insults is completely unnecessary.  I'm done with this thread.
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Pizzabrewer

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Re: DON'T pay off your credit cards club
« Reply #143 on: July 10, 2018, 05:11:40 PM »


1. You don't have 0% money


No?  How so??

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Re: DON'T pay off your credit cards club
« Reply #144 on: July 10, 2018, 05:12:39 PM »


1. You don't have 0% money


No?  How so??

Because it cost you 3%.  Just because you can use the money to earn the 3% back doesn't mean it didn't cost you 3%.

boarder42

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Re: DON'T pay off your credit cards club
« Reply #145 on: July 10, 2018, 05:15:27 PM »


1. You don't have 0% money


No?  How so??

You've stated it multiple times yourself. Your balance transfers and checks charge you a fee. To get to the 0%. By this logic I'll offer you a -3% loan for 18months all you have to do is pay me 1000000% today on the beginning balcance. You'll have -3% money right?  How could you pass that up.

Also you still ignored the question everyone wants to undersand. The math. Not this years math the entirety of the schemes math.

Esp now that youre doing 401k loans. 
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Pizzabrewer

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Re: DON'T pay off your credit cards club
« Reply #146 on: July 10, 2018, 05:20:03 PM »


1. You don't have 0% money


No?  How so??

Because it cost you 3%.  Just because you can use the money to earn the 3% back doesn't mean it didn't cost you 3%.

It nets out to 0% or better.  Works in my book.

boarder42

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Re: DON'T pay off your credit cards club
« Reply #147 on: July 10, 2018, 05:21:10 PM »


1. You don't have 0% money


No?  How so??

Because it cost you 3%.  Just because you can use the money to earn the 3% back doesn't mean it didn't cost you 3%.

It nets out to 0% or better.  Works in my book.

It's like talking to a brick wall.
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Re: DON'T pay off your credit cards club
« Reply #148 on: July 10, 2018, 05:21:33 PM »


1. You don't have 0% money


No?  How so??

You've stated it multiple times yourself. Your balance transfers and checks charge you a fee. To get to the 0%. By this logic I'll offer you a -3% loan for 18months all you have to do is pay me 1000000% today on the beginning balcance. You'll have -3% money right?  How could you pass that up.

Also you still ignored the question everyone wants to undersand. The math. Not this years math the entirety of the schemes math.

Esp now that youre doing 401k loans.

I screwed up in answering you one more time.  I'm done.  You don't get it.  Feel free to fire away, I'm sure you will. 

boarder42

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Re: DON'T pay off your credit cards club
« Reply #149 on: July 10, 2018, 05:24:25 PM »
This is an analytical site provide analytical data.
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