Author Topic: Need your feedback - utilize a zero interest credit card to "stooze" for a year?  (Read 889 times)

waltworks

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TL;DR: I want to use zero interest credit cards to pay my living expenses to spread out capital gains from selling various assets over 2 (or 3) years instead of 1.

So here's the situation:

Parents went away for a week's vacation...damn, I'm old.

In any case, we (my family) want to buy a house. We could buy this house with cash if I sold a bunch of investments, which is basically the plan. We can't really qualify for a conventional mortgage because of FIRE/low income issues.

But if I sell those investments, I'll have skimmed off all of the "low hanging fruit" when it comes to capital gains - ie bond funds, index funds recently purchased, etc. We'll still end up with a decent tax bill, c'est la vie.

That will leave us (until we sell another house which we can't easily do for a year due to an existing lease/tenants in place) with not a lot of cash and lots of highly appreciated investments that would really suck to sell because of the tax consequences (ie, stuff that has appreciated 100%+) when we're already going to have our income inflated for the year due to selling the less-appreciated assets. In a normal year selling some highly appreciated investments isn't a big deal because our AGI is super low and hence we generally don't have to pay any capital gains.

So I was pondering getting a couple of zero-interest credit cards (one for my wife, one for me) and just "stoozing" the year's expenses (ie, just paying for our day to day expenses with the cards, making the minimum payments, and having no interest accrue). Then a year later we'd sell the house/other investments and pay a lot less in capital gains.

Is this a stupid idea for some reason? I'm known for stupid ideas, so you won't offend me if you say yes.

-W
« Last Edit: November 11, 2023, 03:50:16 PM by waltworks »

bacchi

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We're currently stoozing some big bills this year and, if you have a sufficient emergency fund earning 5%, I see no problem with it.

You'd need a card with a really long 0% offer for this to work but, unfortunately, the 18+ month cards have few benefits. If a 15 month period works,  the Discover "it" looks like a great choice with its 2x match for the first year (effectively 10% for categories and 2% on everything else). The WF Active with its $200 bonus also looks good, which is what we're using.

secondcor521

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Stupid?  Maybe not.  Have you considered:

1.  Can you and your spouse get enough in a credit line to stooze for a year?

2.  When would you sell the other house?  January 2025?  If then, does a 15 month period give you enough wiggle room on the timing?  Maybe, as long as the real estate market where the other house is located is good in January 2025.  Not selling in time is a risk - what would you do if that didn't pan out?

3.  I'm unclear why you would sell the investments with the larger capital gains when you sold the other house.  To pay back the stoozing cards?  Can't you pay them back with the proceeds from the sale of the other house?

4.  Where are you getting the minimum payments for the stoozing cards from?

5.  Depending on the numbers, your capital gains tax from selling the other house could easily put you into the 20% capital gains bracket regardless of whether you sell it now, in 2024, or in 2025.  If so, the only reason to hold off on selling the other house is because of your tenant, not for tax reasons.  I'm not sure which is easier - selling a rental with a tenant in it, or your stoozing idea.  I'm not a landlord and never have been, so I simply don't know.  Selling the rental with a tenant in it is certainly less risky and creates a less time critical situation for you.  I would imagine showing it is harder, but if you're selling it as a rental, having an existing tenant is probably a plus.

Sibley

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I know I've seen threads on here about getting a mortgage using assets. Is that not an option for you?

lucenzo11

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Stupid?  Maybe not.  Have you considered:

1.  Can you and your spouse get enough in a credit line to stooze for a year?

2.  When would you sell the other house?  January 2025?  If then, does a 15 month period give you enough wiggle room on the timing?  Maybe, as long as the real estate market where the other house is located is good in January 2025.  Not selling in time is a risk - what would you do if that didn't pan out?

3.  I'm unclear why you would sell the investments with the larger capital gains when you sold the other house.  To pay back the stoozing cards?  Can't you pay them back with the proceeds from the sale of the other house?

4.  Where are you getting the minimum payments for the stoozing cards from?

5.  Depending on the numbers, your capital gains tax from selling the other house could easily put you into the 20% capital gains bracket regardless of whether you sell it now, in 2024, or in 2025.  If so, the only reason to hold off on selling the other house is because of your tenant, not for tax reasons.  I'm not sure which is easier - selling a rental with a tenant in it, or your stoozing idea.  I'm not a landlord and never have been, so I simply don't know.  Selling the rental with a tenant in it is certainly less risky and creates a less time critical situation for you.  I would imagine showing it is harder, but if you're selling it as a rental, having an existing tenant is probably a plus.

I agree with all of this and it's a little tough to think through this situation without some numbers. Can you provide even some very rough numbers for us to see and think through? Overall, it is maybe doable, but seems a little more complex than it needs to be.

mistymoney

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whats stooze?

secondcor521

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whats stooze?

Old term for borrowing on credit cards at 0% and investing the proceeds (usually in safe investments like savings accounts or CDs) at 5% and benefitting from the arbitrage.  It was common back in 2000 or so when an environment existed which was similar to today.

sonofsven

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I don't think it's a stupid idea, per se, and that's probably because I've done something similar, successfully, so I might be biased.
Just remember, the interest does accrue, and you will owe it, unless you follow "the rules" the cc company has laid out, so make sure you do. Take screenshots and/or print the terms when you sign up for the card. Not all cc companies are descriptive in your monthly billing statement of when the actual payoff date is to avoid paying interest. Hmm, wonder why?
For frugal types, it's hard to see that debt piling up every month when you could pay it off, so be wary of that as well.

fuzzy math

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Do it. I've done it for years. Have $12k sitting on a 0% WF card right now. The rate expires in June 2024 and at that point I'm going to get DH a 0% card and strategically pay mine down while charging his up. The one thing I see that could improve your situation would be to stagger both partners getting a card. If you can do it now with 1, you'll have a longer timeframe later before the $$ comes due.


catccc

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Holding tens of thousands at 0% across multiple cards currently.  Do it.  Just be organized so there are no surprises about when promo rates end.  I updated all of my payment due dates to a single date for simplicity, and some of the rate expirations changed.  Which isn't an issue, it's just important to be aware.  Also earning thousands more in sign up bonuses along the way, the bonuses actually outweigh the interest income and a majority of it is tax free, to boot.
« Last Edit: November 18, 2023, 08:33:38 PM by catccc »