Author Topic: Oh Boy, I've been selected for $25,000 of debt!  (Read 7614 times)

LalsConstant

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Oh Boy, I've been selected for $25,000 of debt!
« on: August 15, 2013, 10:21:34 AM »
I'm normally loathe to mock people who have decided poorly, but I will viciously lay into terrible offers, poor business practices, and products like this one with no mercy!

I'm paraphrasing here, but I recently got a letter from Discover that I'd been selected to apply for a PERSONAL LOAN!  Up to $25,000!  AS LOW AS 7.99% APR!

So, up to twenty five grand, more than financially optimized people spend in a year, at a rate likely to be higher than 8%.  Oh boy sign me up.

To be fair, the letter suggested using the loan to pay off higher interest debts.  Okay that would be pretty smart, so some credit there.  8 is less then 30 and all.

But lacking any debts at the moment, and striving to keep it that way, what possible use could I have for this wonderful opportunity?

Well how about...

A VACATION!

Okay smart guys, here's a clue, unless you are just resolving a liquidity problem because you... unexpectedly had to take a vacation? you generally shouldn't take a loan out for a vacation.  I am just saying.

PERSONAL EXPENSES!

Wow that's great, I must be a movie star now, because what the hell personal expense do I have that requires me to take out a loan?  I guess if I want to start eating diamond studded bacon and fried Faberge eggs today's my lucky day?

I check my credit report regularly, it consistently shows my oustanding debt as $0.  They have no reason to suspect I have any other loans to pay off. 

Look I have no problem with advertising your services and products, but why pay good money to send me this when there's no reason to expect I'll use it?

I mean I understand credit card offers in the mail, I do use a credit card often, just because I pay it off weekly doesn't mean I don't use it and earn them merchant fees.

You can even send me a letter saying "Hey we offer loans", because that's informative.  That's valid advertising.

But a loan ready to go with ad copy suggesting I find reasons to borrow money I can't afford to spend?  It's just not fiduciary.

sleepyguy

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Re: Oh Boy, I've been selected for $25,000 of debt!
« Reply #1 on: August 15, 2013, 11:26:47 AM »
Yeah, it's pretty hilarious sometimes.  We've been using a 0% 15mth CC card transfer balance on about 30k... we bought a car with it to use cash incentives then put the rest away doing on an ETF.  I think we're on the 3 or 4th round now (15mth turnarounds), you have to pay like $200 min a month (0%)... at the end you either pay off the entire amount get another card, transfer the balance and get another 15mths.  I've made at least a few $1000 doing this, since the market has picked up a bit... also the $8k cash incentive on the car was nice :).

But each and EVERY month they send us cash advance cheques with a whopping 18% interest rate, lol... my balance is 0 limit because I've transfered the entire amount already to invest!  So they want me to default my loan, give up my 0%... default then get a huge penalty plus the cash advance interest and charges, lol.  Hilarious.  Card is MBNA btw.

I'm normally loathe to mock people who have decided poorly, but I will viciously lay into terrible offers, poor business practices, and products like this one with no mercy!

I'm paraphrasing here, but I recently got a letter from Discover that I'd been selected to apply for a PERSONAL LOAN!  Up to $25,000!  AS LOW AS 7.99% APR!

So, up to twenty five grand, more than financially optimized people spend in a year, at a rate likely to be higher than 8%.  Oh boy sign me up.

To be fair, the letter suggested using the loan to pay off higher interest debts.  Okay that would be pretty smart, so some credit there.  8 is less then 30 and all.

But lacking any debts at the moment, and striving to keep it that way, what possible use could I have for this wonderful opportunity?

Well how about...

A VACATION!

Okay smart guys, here's a clue, unless you are just resolving a liquidity problem because you... unexpectedly had to take a vacation? you generally shouldn't take a loan out for a vacation.  I am just saying.

PERSONAL EXPENSES!

Wow that's great, I must be a movie star now, because what the hell personal expense do I have that requires me to take out a loan?  I guess if I want to start eating diamond studded bacon and fried Faberge eggs today's my lucky day?

I check my credit report regularly, it consistently shows my oustanding debt as $0.  They have no reason to suspect I have any other loans to pay off. 

Look I have no problem with advertising your services and products, but why pay good money to send me this when there's no reason to expect I'll use it?

I mean I understand credit card offers in the mail, I do use a credit card often, just because I pay it off weekly doesn't mean I don't use it and earn them merchant fees.

You can even send me a letter saying "Hey we offer loans", because that's informative.  That's valid advertising.

But a loan ready to go with ad copy suggesting I find reasons to borrow money I can't afford to spend?  It's just not fiduciary.

Rebecca Stapler

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Re: Oh Boy, I've been selected for $25,000 of debt!
« Reply #2 on: August 15, 2013, 12:18:09 PM »
The advance checks are the WORST. I loathe that they put these through the mail because I hate to think what would happen if that piece of mail didn't make it to my mailbox. Those envelopes go straight into the shredder, but I'm so paranoid that I would re-shred them if I could. I hate those things!

Dr.Vibrissae

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Re: Oh Boy, I've been selected for $25,000 of debt!
« Reply #3 on: August 15, 2013, 12:36:29 PM »
You can ask them to stop sending those advance checks.  I hated them too, so I called my card company to have them stop.  I think the info was on the mailing somewhere (so you may have to open it) but I don't get those anymore.

Mr.Macinstache

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Re: Oh Boy, I've been selected for $25,000 of debt!
« Reply #4 on: August 15, 2013, 01:25:21 PM »
If you're feeling really honorary, you can mail back some words in their prepaid envelope for them to read.

Did you all see the story on the guy who changed the terms on the credit card and won in court? Pretty glorious if you ask me. :D

GreenGuava

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Re: Oh Boy, I've been selected for $25,000 of debt!
« Reply #5 on: August 15, 2013, 01:38:48 PM »
Did you all see the story on the guy who changed the terms on the credit card and won in court? Pretty glorious if you ask me. :D

Is it a joke or did it really happen?  I'm curious to hear about it if it's real.

NumberJohnny5

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Re: Oh Boy, I've been selected for $25,000 of debt!
« Reply #6 on: August 15, 2013, 03:43:24 PM »
Did you all see the story on the guy who changed the terms on the credit card and won in court? Pretty glorious if you ask me. :D

Is it a joke or did it really happen?  I'm curious to hear about it if it's real.

It's real, but it's still going through the court system last I heard. Yeah, he shouldn't have "tricked" them into agreeing to fine-print he knew they didn't read, but isn't that kinda the whole point (reverse the situation, and the lender will have no problem exclaiming "but it's right there in tiny tiny print, it's not OUR fault he/she was too stupid to read it!").

marty998

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Re: Oh Boy, I've been selected for $25,000 of debt!
« Reply #7 on: August 15, 2013, 04:03:53 PM »
Yep I saw that story. Wouldn't surprise me if it was the 17 year old work experience kid opening the mail, saw the signature and just starting entering the details into the system.

Some organisations spend time training their staff, others just use the cheapest short term contract labour going around at the time. Really it is true, you get what you pay for.

Just goes to show that no matter what your job is or how small a part of an organisation you think you are, cock-ups small or large have the potential to morph into something like this.

dragoncar

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Re: Oh Boy, I've been selected for $25,000 of debt!
« Reply #8 on: August 15, 2013, 06:35:38 PM »
You can ask them to stop sending those advance checks.  I hated them too, so I called my card company to have them stop.  I think the info was on the mailing somewhere (so you may have to open it) but I don't get those anymore.

I'd do that, but I'm still waiting for my 0%, $0 fee (best I've seen is 1.5% fee)

MgoSam

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Re: Oh Boy, I've been selected for $25,000 of debt!
« Reply #9 on: August 15, 2013, 06:42:03 PM »
Yes the case is true.

http://rt.com/business/man-outsmarts-banks-wins-court-221/

That said, the court threw out the late fees and everything the bank wanted except his actual charges. He is now suing for violation of the terms and damages. This is pretty funny.

dragoncar

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Re: Oh Boy, I've been selected for $25,000 of debt!
« Reply #10 on: August 15, 2013, 06:52:08 PM »
Yes the case is true.

http://rt.com/business/man-outsmarts-banks-wins-court-221/

That said, the court threw out the late fees and everything the bank wanted except his actual charges. He is now suing for violation of the terms and damages. This is pretty funny.

Note that this is in Russia, which of course has its own law and practices.  When was the last time a credit card company sent you a signed contract?

tomsang

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Re: Oh Boy, I've been selected for $25,000 of debt!
« Reply #11 on: August 15, 2013, 07:59:54 PM »
Is there a fee on the card? If no fee you should grab it, if you can get $25k. It will add to your denominator for your credit score, they most likely will send you checks for 0% for 18 months, and it is part of your emergency fund. Wow!!  Debt is amazing if used like a mustachian!

I have probably made $250,000 over the years because I have had access to cheap and plentiful credit. Keep your options and eyes open and you will benefit greatly if you are mustachian with your spending and use debt as an asset to buy distressed investments.

Good luck!

Mr.Macinstache

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Re: Oh Boy, I've been selected for $25,000 of debt!
« Reply #12 on: August 16, 2013, 07:22:59 AM »
Is there a fee on the card? If no fee you should grab it, if you can get $25k. It will add to your denominator for your credit score, they most likely will send you checks for 0% for 18 months, and it is part of your emergency fund. Wow!!  Debt is amazing if used like a mustachian!

I have probably made $250,000 over the years because I have had access to cheap and plentiful credit. Keep your options and eyes open and you will benefit greatly if you are mustachian with your spending and use debt as an asset to buy distressed investments.

Good luck!

I have all kinds of weekly offers on cheap/free credit, but how you making money off of them?

I have a card with an $8500 limit that I keep a 0 balance on as part of an EF situation.... I'm open to tips on making money on all these 0% offers thrown my way though!

Gerard

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Re: Oh Boy, I've been selected for $25,000 of debt!
« Reply #13 on: August 16, 2013, 07:35:11 AM »
I have all kinds of weekly offers on cheap/free credit, but how you making money off of them?

Use the 0% loan to either pay off higher-interest debt for a while, or to invest in anything that pays more than 0%. Google "credit card arbitrage" for suggestions. Just make sure you make all your payments on time and have enough loot around to pay off the whole thing when the promotional period ends. Also, beware "balance transfer fees".

I used a couple of these offers to bump up my condo down payment to 20% and thus avoid mortgage insurance. Came out about $1600 ahead on the deal, although it was a drag to keep shuffling the balance around until I could pay it all off.

Insanity

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Re: Oh Boy, I've been selected for $25,000 of debt!
« Reply #14 on: August 16, 2013, 07:52:46 AM »
The only issue that I've had with that is managing an additional payment.  I suppose if you are moving money around it isn't that big of a deal.  But we were debating about doing another move of credit card debt to a 0% offer (3% fee - which is still better than the credit card fee), but it was just easier to pay it off.

Now, the ones that give you 0% interest on purchases are a wonderful thing.  Especially when they offer cash back.

Mr.Macinstache

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Re: Oh Boy, I've been selected for $25,000 of debt!
« Reply #15 on: August 16, 2013, 07:55:52 AM »
I have all kinds of weekly offers on cheap/free credit, but how you making money off of them?

Use the 0% loan to either pay off higher-interest debt for a while, or to invest in anything that pays more than 0%. Google "credit card arbitrage" for suggestions. Just make sure you make all your payments on time and have enough loot around to pay off the whole thing when the promotional period ends. Also, beware "balance transfer fees".

I used a couple of these offers to bump up my condo down payment to 20% and thus avoid mortgage insurance. Came out about $1600 ahead on the deal, although it was a drag to keep shuffling the balance around until I could pay it all off.

Thanks. Yes, I have done that in the past to refi some debt and pay it off at 0%. I think I might do it again for the $5800 in student loans @ 4.5% now.

dragoncar

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Re: Oh Boy, I've been selected for $25,000 of debt!
« Reply #16 on: August 16, 2013, 08:11:49 AM »
Is there a fee on the card? If no fee you should grab it, if you can get $25k. It will add to your denominator for your credit score, they most likely will send you checks for 0% for 18 months, and it is part of your emergency fund. Wow!!  Debt is amazing if used like a mustachian!

I have probably made $250,000 over the years because I have had access to cheap and plentiful credit. Keep your options and eyes open and you will benefit greatly if you are mustachian with your spending and use debt as an asset to buy distressed investments.

Good luck!

I have all kinds of weekly offers on cheap/free credit, but how you making money off of them?

I have a card with an $8500 limit that I keep a 0 balance on as part of an EF situation.... I'm open to tips on making money on all these 0% offers thrown my way though!

This was more popular in 2007 when you could just stick it in a high interest checking account for a free 5%

tomsang

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Re: Oh Boy, I've been selected for $25,000 of debt!
« Reply #17 on: August 16, 2013, 08:54:18 AM »
Access to credit is something that is earned by being responsible throughout your life. I manage my credit like I manage my assets. With that being said, it is not unusual for me to have a few hundred thousand on the personal LOCs and credit cards. The key is to use the credit to expand wealth and not to increase your spending on frivolous things.

Over the past few years, I have used the credit to:

1) While walking down the street we noticed that there was a house for sale by owner. Great view, tiny little mustachian house, great location and lot. I checked our savings account and noticed that we had about $3,000 in the account. That was not going to do it. Pulled out the Visa, LOC, and HELOC and put the $89,000 down payment on that, locked in the rest at 3.875% for 30 years. Put $10k of updates on the VISA and now we have a great rental. We were contemplating buying the same house across the street from the owner a year later, but the house is now listed for $125,000 more than we paid. That is probably high, but we have around $80-$100k in equity within 12 months.

2) A few years ago, very responsible sister, was going through some tough times. She was moving out of her large house and buying a mustachian house.  She needed $50k and was willing to pay me 10%. I took an 18 month 0% for a 3% fee. Lent her the money, told her no interest as I wanted to support her. Within a year I open the mail and a cashier's check for $55k was there. I tried to give back the interest, but she would not take it. $3,500 profit.

3) Two years ago, one of my side gigs was helping friends start a business. The help I provided was finding them financing for a $8m project. They invested $1.3m in the project. In the final hour the bank added another roadblock in requirement for a bridge loan of $300k until the building was completed. I put in $60k at 18%, received $150k of ownership, and have had fun watching it grow. Ownership was based on other help but made $18k in arbitrage. Also, only invested as I knew in detail the project and the profitability of the operations.

4) Another was a business that I helped a friend start and build 10 years ago, unfortunately it became available with his passing. I wanted to help his sons, so I bought in 10% for $30k. My ownership kicks off $20k-$40k a year. This is probably not a hugely profitable venture as it entails managing the two adult sons, but they are like family to me. They would most likely bankrupt the business, so I feel that I am doing well for him and have great hope that the sons will be hugely successful in their lives soon.

5) Other deals and opportunities throughout the years pop up a few times per year. I really can't recall one where I have been burned, but I am very conservative in my investing.  Maybe paying for things with debt, actually forces stronger due diligence.

6) Also pure debt arbitrage can be pure money, but having access to capital is where the large wins pop up. 

I don't like keeping more than $3kish in the checking as it pays .5% or something.  Mostly, I keep $0 with an auto draw on my LOC.  When I get paid, I put 100% on the LOC which costs 7% if I am using my personal LOC or 4.24% if I am on my HELOC. I rarely keep a balance on the personal LOC unless a deal pops up. Then I focus on paying it off. At any given time I have access to $300k- $400k in credit. My credit score is in the high 700's and sometimes low 800's. If I have $50k on CC, but have $600k in lines then I am showing 8% utilization, win capacity or access to credit of $550k, etc. My accounts are old, I usually only open a new account CC if they will give me $50k, I pay all bills on time, actually pay off most debt throughout the year, I have spikes when I make larger purchase. Even then credit is in the 730's.  As the old saying goes... I actively increase my credit when I don't need it. This is when my credit is at its lowest, score the highest, etc.

Debt is a powerful weapon in building wealth. I only buy what I can afford to pay off with other investments if everything hits the fan. Protect and use your debt like you would your assets. Have fun!  Keep your eyes out for deals and they will pop up.

P.S.  Added bonus, wife sees $0 in the bank, so she is less likely to spend money. Also, having as much on credit at times keeps her focused on paying off debt and not buying trinkets. She is more frugal than me, so we are all good there.

Self-employed-swami

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Re: Oh Boy, I've been selected for $25,000 of debt!
« Reply #18 on: August 16, 2013, 09:21:19 AM »
Yes the case is true.

http://rt.com/business/man-outsmarts-banks-wins-court-221/

That said, the court threw out the late fees and everything the bank wanted except his actual charges. He is now suing for violation of the terms and damages. This is pretty funny.

Note that this is in Russia, which of course has its own law and practices.  When was the last time a credit card company sent you a signed contract?

I think that's genius! Good for him.

I doubt he'll win his 'cancellation payment' but I do hope it teaches the bank a lesson.

AlmostIndependent

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Re: Oh Boy, I've been selected for $25,000 of debt!
« Reply #19 on: August 16, 2013, 10:44:47 AM »
You can ask them to stop sending those advance checks.  I hated them too, so I called my card company to have them stop.  I think the info was on the mailing somewhere (so you may have to open it) but I don't get those anymore.

I'd do that, but I'm still waiting for my 0%, $0 fee (best I've seen is 1.5% fee)

This happened to me a couple of times. I max out the card and stuff the cash in a tax-exempt short term bond fund. I wait out the promotional period and then pay it off. It's netted me a couple grand over the years. I haven't seen a 0%, $0 fee offer in a long time.

Paul der Krake

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Re: Oh Boy, I've been selected for $25,000 of debt!
« Reply #20 on: August 16, 2013, 12:29:32 PM »
When I first tried to establish credit, after getting my first card I read through all the papers they send you regarding your rights and naively decided to allow them to share my information with other lenders.

"Man, it'd be really cool to get offers in the mail for those super rewards cards everyone seems to have over at the MMM forums! I sure want them to share how good of a customer I am with everybody!" I said.

Well after 12 months I have received I have received exactly ONE offer worth considering (and then realized they sent it to virtually everybody in my town with a pulse), and 8 offers from online payday lenders and even one from some shoddy name like "veterans credit united" with a heartfelt letter thanking me for my service. Does anyone know if SSNs are passed along to other firms?


Needless to say, I followed the fineprint and have removed myself from the information sharing scheme since.

LalsConstant

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Re: Oh Boy, I've been selected for $25,000 of debt!
« Reply #21 on: August 16, 2013, 01:57:57 PM »
While debt arbitrage and leverage are great, as a recovering idiot who has only been using credit cards correctly for two and a half years, I personally am not ready for that kind of thing.

I am still working on getting lower expenses.   It is trending the right direction for me slowly over time.

But in the general sense of the application they sent me, the emphasis was not at all on gaining advantage beyond consolidating higher interest debts.  It was on frivolity.

Personally I will probably never use leverage.  And I am okay with that, my "neither a borrower nor a lender be" approach makes me happy.

Jamesqf

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Re: Oh Boy, I've been selected for $25,000 of debt!
« Reply #22 on: August 16, 2013, 03:10:15 PM »
Well after 12 months I have received I have received exactly ONE offer worth considering (and then realized they sent it to virtually everybody in my town with a pulse)...

And quite probably a number of people without :-)  I bought my house about 15 years ago, from an older woman whose husband had died several years previously.  It was more than a decade before I stopped regularly getting credit card (and life insurance!) offers for him.