Author Topic: Ridiculous Credit offers  (Read 7397 times)

Mr Mark

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Ridiculous Credit offers
« on: March 07, 2012, 01:57:02 PM »

Some of the junk financial stuff sent to me in the mail still makes me amazed. Who signs up for this stuff?

Recently got a 'pre-approved' offer of a Capital One credit card with 3k limit, 0% until end of the year.

Sounds great, right? Small print: There's a $60 fee, some other fees for balance transfers, 0% seems true but after December it goes to 22% APR. Late on just 1 payment  EVER after that, and that bumps the rate to a massive 30% APR for everything, BTW.

I presume it's the same with all these 0% furniture offers too.

AJ

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Re: Ridiculous Credit offers
« Reply #1 on: March 07, 2012, 02:26:43 PM »
My FIL was *convinced* he was going to go to jail because he got an email from an "FBI agent" in his SPAM folder telling him he needed to pay them or risk jail. He has sent money to a facebook "girlfriend" he had never met or spoke with on the phone (she would only converse with him via facebook for a variety of flimsy reasons). He was crushed when he found out it was a scammer. He has also sent money to multiple people claiming he has an inheritance, and that they just need the "deposit" on it for him to claim his millions. Basically, he has fallen for every single how-do-people-fall-for-that scam in the book. Yet he still thinks he's a pretty smart dude :/ He's not mentally ill or senile, just really gullible. There must be tons of other people like him that just can't resist the lure of easy money.

Grigory

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Re: Ridiculous Credit offers
« Reply #2 on: March 07, 2012, 08:32:18 PM »
Mark, to a certain kind of person that credit card offer could mean an 2% loan for a whole year... (2% = $60 fee)

AJ, i wouldn't be surprised if your father-in-law is a national hero in Nigeria lol

shedinator

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Re: Ridiculous Credit offers
« Reply #3 on: March 07, 2012, 09:07:45 PM »
In theory, the interest shouldn't be a problem, since we're all paying off our credit cards in full every month, riiiight? :)

arebelspy

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Re: Ridiculous Credit offers
« Reply #4 on: March 07, 2012, 09:22:32 PM »
In theory, the interest shouldn't be a problem, since we're all paying off our credit cards in full every month, riiiight? :)

Correct.

I have no idea about the interest rate of any of my credit cards (other than a new one that is at a 0% from a balance transfer offer, which I will pay off right before it starts earning interest - at what rate, I have no idea - in Nov. 2012).
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Mr Mark

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Re: Ridiculous Credit offers
« Reply #5 on: March 08, 2012, 03:47:30 PM »

I know it offers opportunities [to the clever & well disciplined] for a bit of tax-free cheap leverage, I'm doing the same with a card myself and making $50 a month off them too! (But be careful - had a buddy juggling 20 cards and it got very stressful and time consuming. )

In doing this we are, to a certain extent, riding on the people who are the suckers paying for it all, and who end up with a balance they can't pay, only service, at obscene rates.


sol

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Re: Ridiculous Credit offers
« Reply #6 on: March 08, 2012, 06:38:12 PM »
I know it offers opportunities [to the clever & well disciplined] for a bit of tax-free cheap leverage,

What sort benefits does it offer to people who don't have any other debt to displace onto a 0% card?

I guess I could max it out a 10k card with a 1% CD, but it hardly seems worth the potential of screwing it up or dinging your credit score for a measly $100.

Parizade

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Re: Ridiculous Credit offers
« Reply #7 on: March 08, 2012, 08:35:53 PM »
My son received a "pre-approved" credit card offer when he was 7 years old. I was tempted to let him accept it and max it out to teach the card company a lesson, but they probably would have expected me to pay it back.

Mr Mark

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Re: Ridiculous Credit offers
« Reply #8 on: March 08, 2012, 08:50:47 PM »
I know it offers opportunities [to the clever & well disciplined] for a bit of tax-free cheap leverage,

What sort benefits does it offer to people who don't have any other debt to displace onto a 0% card?

I guess I could max it out a 10k card with a 1% CD, but it hardly seems worth the potential of screwing it up or dinging your credit score for a measly $100.

At the v short term, using a free card, and then paying off the balance, can give you effectively free credit terms for 30 - 180+ days on weekly/monthly cashflow. Why not? Over the long term those little 0.9% - 7% compounded add up. (because the comparison opportunity cost for that cash should return better than 1%!). Mentally (or literally) you could reserve the cash/liquid balance somewhere I guess, but you'd be a bit better off with zero risk. Not a bad return for a few hours work.

But overall, you're totally correct. Their target are people with debts who can affort to service more debt. It's bait. We're just clever enough to avoid the hook.  It's not the road to big returns.

Danger! Will Robinson, Danger!

sol

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Re: Ridiculous Credit offers
« Reply #9 on: March 08, 2012, 10:16:21 PM »
At the v short term, using a free card, and then paying off the balance, can give you effectively free credit terms for 30 - 180+ days on weekly/monthly cashflow. Why not? Over the long term those little 0.9% - 7% compounded add up. (because the comparison opportunity cost for that cash should return better than 1%!). Mentally (or literally) you could reserve the cash/liquid balance somewhere I guess, but you'd be a bit better off with zero risk. Not a bad return for a few hours work.

I guess I'm still unclear on the potential returns here.  Most of the credit card arbitrage schemes I've seen involve putting large sums of credit from a 0% card into a high yield savings account.  If you can get 20k in credit and park in a 5% account for a year, you theoretically make $1000 for the trouble of making regular minimum payments on the 0% card.  That's all well and good, but high yield savings accounts aren't what they used to be, and the credit rate risk-spread is so low these days that I can't imagine this is any more worthwhile than spending an equivalent amount of hours at minimum wage.

I see the potential for someone who's carrying a large student loan debt at 6%, because they're losing less money for the duration by transferring that debt to a 0% card.  But for people who don't have any debt, this seems like a losing proposition.

If I'm missing something here, someone please explain it to me.

cosmie

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Re: Ridiculous Credit offers
« Reply #10 on: March 08, 2012, 10:29:08 PM »
In doing this we are, to a certain extent, riding on the people who are the suckers paying for it all, and who end up with a balance they can't pay, only service, at obscene rates.
This, actually, has been reversing. See here.

Mr Mark

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Re: Ridiculous Credit offers
« Reply #11 on: March 08, 2012, 10:44:54 PM »

Your opportunity cost for cash should be about 7% RT. So for such small amounts on the cards, for someone with no debt, its not much. $200/yr? But I'll take $200 for a few hours.

And that article is from 2009, about how those CC companies were going to get us.

cosmie

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Re: Ridiculous Credit offers
« Reply #12 on: March 08, 2012, 10:51:34 PM »
That article may be from 2009, but it was quite accurate. Since then, credit card companies have dumped many of their riskier customers, had particular cash cows (like college students) legally restricted, had merchant fee increases capped, and raised the interest rates and annual fees of Mustachian customers to make up for it. The only reason why many of the articles other predictions didn't happen were due to federal legislation preventing it.

bananabread

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Re: Ridiculous Credit offers
« Reply #13 on: March 11, 2012, 10:23:45 AM »
My cat got a credit card in the mail once. Pre-approved and everything. This was, of course, pre-2008, but still. Really?

Parizade

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Re: Ridiculous Credit offers
« Reply #14 on: March 11, 2012, 06:36:29 PM »
My cat got a credit card in the mail once. Pre-approved and everything. This was, of course, pre-2008, but still. Really?

that's hilarious!

chrissyo

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Re: Ridiculous Credit offers
« Reply #15 on: March 12, 2012, 09:50:22 AM »
I have no idea about the interest rate of any of my credit cards (other than a new one that is at a 0% from a balance transfer offer, which I will pay off right before it starts earning interest - at what rate, I have no idea - in Nov. 2012).

Ditto; I pay a 1/month fee on a cash back card (because net-net, no better offers exist in the UK at the mo), but I haven't the slightest clue what interest rate any of my cards carry, because I've not paid a penny for interest in years.

palvar

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Re: Ridiculous Credit offers
« Reply #16 on: March 12, 2012, 01:18:35 PM »
My cat got a credit card in the mail once. Pre-approved and everything. This was, of course, pre-2008, but still. Really?

Did your cat at least have a human name?

sol

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Re: Ridiculous Credit offers
« Reply #17 on: March 12, 2012, 01:36:24 PM »
My cat got a credit card in the mail once. Pre-approved and everything. This was, of course, pre-2008, but still. Really?

Did your cat at least have a human name?

"Kitty McSparklepants, you've been pre-selected!"

Parizade

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Re: Ridiculous Credit offers
« Reply #18 on: March 12, 2012, 02:53:11 PM »
My cat got a credit card in the mail once. Pre-approved and everything. This was, of course, pre-2008, but still. Really?

Did your cat at least have a human name?

"Kitty McSparklepants, you've been pre-selected!"

oh thank god I wasn't drinking coffee when I read that or I'd need a new keyboard

onehappypanda

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Re: Ridiculous Credit offers
« Reply #19 on: March 12, 2012, 10:15:07 PM »
My cat got a credit card in the mail once. Pre-approved and everything. This was, of course, pre-2008, but still. Really?

Did your cat at least have a human name?

"Kitty McSparklepants, you've been pre-selected!"

oh thank god I wasn't drinking coffee when I read that or I'd need a new keyboard

This might've made my night.

Poor Ms. Tigger Kitty is getting jealous though. No one's offered her any credit and she's 70-something in cat years. Must be discrimination.