Crazy credit card/ mortgage idea

[duffman]

Just an idea which has had little thought, and even less research.

You can now get credit cards where if you transfer over your existing credit card debt, you pay no interest on it. (The catch is that any new debt you rack up will pwn you)
When I heard about these cards I thought, "could this be exploited?".

My thought was:
1- Get credit card with largest available limit
2- Use credit card to pay mortgage
3- Before interest is payable, transfer debt to new card with no interest on balance, or annual fee
4- Make minimum repayments of card debt from mortgage. In the mean time the mortgage interest is being calculated on a smaller figure.

Not a brilliant idea, and has numerous issues.
I don't really know how credit cards work, on account of never having one, so I don't know how point 2 would work.

$20,000 debt on a card would save ~$1,200 p.a. on mortgage at current rates.
Fees and time required would probably make it unfeasable, if its even possible in the first place.

Thoughts?

[Mungus]

It's not a silly idea, but point 2 is your problem. Any payment to a mortgage from a Credit Card will be treated as a cash advance and interest charged from the day you pay it (& some Credit Cards also charge another fee on cash advances).

If you have money saved up for a big ticket item (car, bike, boat,etc), buy that item on your CC, pay the money were going to spend on it off the mortgage and then do your transfer. That would work a treat provided, as you say, you don't use your new cc for anything else.

[pauly_]

requires NPV analysis-

%P.A. interest rate figures for all loan products, terms and conditions, fees and timeframes, dates of interest raised etc.

we do something similar, holding surplus funds in a mortgage account with a CC balance at a nominal rate, the saving is about $1200 a year.

so yes it is possible

[jules_1972]

Just have an offset account.......

CCard can be evil.....

[mystery]

As Mungus said, the cash advance rate/fees would kill the idea.

That said, you can still save money with the offset account & paying all your bills by credit card, then paying it off in full each month.

[Dubs]

cant pay credit with credit (and not get Koola'd for it)


Dubs

[Tin Tin]

Offset account is the way to go

[SmashNGrabb]

Google stoozing. Similar concept, can be done but banks are aware that people do this and work to counteract it with credit cards fees and cash advance rates. I looked into doing it but what it came down to was not enough profit for my time and effort.

[Cone Cat]

I actually tried to do this. But not to pay the mortgage off as I don't have one, but to invest the money into a term deposit and earn a higher interest rate than the rate on the credit card.

The target credit card was bank west. 1.99% interest on balance transfers for one year with a $55.00 annual fee. Term deposit was offering 6.25%. So on an amount of $10,000, earn $625 less the $55.00 annual fee and interest charges, $371 profit.

I have a credit card which I don't use. I rang up that bank and asked them to put the credit limit up to twenty kay and then applied with bank west for the transfer. Only issue was getting the card up to twenty kay to be tranfered. Luckily, I had planned to buy some camera gear, plus paying a few bills and basically doing everything I could on the card to get the balance up, even buying a new bike.

Only problem is, I think bank west cottoned on to what I was doing. I guess mentioning existing term deposit accounts must have twigged with somebody because they only approved a limit of $3500. Seems very strange when the bank I have the first card with is happy for myself to tell them what credit limit I wanted and bankwest are only willing to give me a chump change card. Bank west even still held (at the time) our title deed from our mortgage so they knew that a twenty kay credit card wouldn't have been a problem to a DINK home owner.

So I told bank west to shove their stupid card up their stupid nose and discharged the title deed documents from them.

[duffman]

we do something similar, holding surplus funds in a mortgage account with a CC balance at a nominal rate, the saving is about $1200 a year.

By that do you mean you pay all your bills/ living expenses on CC, and have surplus in mortgage, until the card payment is due?
Or are you saying something different?

Best I could come up with for point 2 was using ebay/Paypal. Say $20k limit.
I put my bike on ebay for $20k ($45 ebay fee)
Missus buys it using Paypal, which is linked to her CC. ($0)
Money goes into my Paypal account (1.5% fee = $300 )
I withdraw from Paypal and put into mortgage ($0)
Missus gets new card with zero interest
Depending on CC repayments, save ~$1000 on mortgage interest p.a. = $650 saving.

Probably not worth the trouble or risk unless you've got a $100k limit.

Thanks for entertainging the idea, and me.