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Author Topic: Risky business  (Read 1709 times)

bachismo

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Risky business
« on: July 05, 2006, 10:50:03 AM »
Can anyone tell me if there is a reason not to use credit cards instead of private loans?  I get offers all the time for either 0% for 1 year or 3.9% for life.  These rates are good for balance transfers.  I assume you could initiate the loan with a private lender and then transfer the balance to the cc at a much lower rate.  You probably would need to use multiple credit cards in order to achieve a large enough credit line, but I don't see why it couldn't be done.  Aside from the risk of the rate going up drastically if you screw up, are there any other drawbacks? 

fauxsheesy

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Re: Risky business
« Reply #1 on: July 05, 2006, 01:59:28 PM »
Can anyone tell me if there is a reason not to use credit cards instead of private loans?  I get offers all the time for either 0% for 1 year or 3.9% for life.  These rates are good for balance transfers.  I assume you could initiate the loan with a private lender and then transfer the balance to the cc at a much lower rate.  You probably would need to use multiple credit cards in order to achieve a large enough credit line, but I don't see why it couldn't be done.  Aside from the risk of the rate going up drastically if you screw up, are there any other drawbacks? 

credit cards give you no ability to defer payment.  and like you said, if you "screw up" they will eat your young.
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cesco

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Re: Risky business
« Reply #2 on: July 05, 2006, 07:59:16 PM »
The interest rate is not under your control.  You don't have to screw up for them to raise the rate - various things can happen.  The fact that you all of a sudden assume thousands in debt on credit cards will screw with your debt/available credit ratio, meaning your credit score can go down.  This, in turn, gives reason for the credit cards to increase your rate. 

Example is just to show that they can raise your rates as a result of various things - even if you pay your cards on time every month.

Too risky, too many unknowns.
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Momo09

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Re: Risky business
« Reply #3 on: July 05, 2006, 08:29:17 PM »
I thought about doing the same, except in my case instead of writing the school a check for tuition, I would charge it on my card and just wait a year to pay.  But the danger (from what I'm aware of) is any negative marks on the credit report will cause the rate and fees to skyrocket.  As tempting as it may, I know playing with credit card is almost like playing with fire -- it takes skills and disipline that they are banking few people possess.

Good luck.
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Momo09

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Re: Risky business
« Reply #4 on: July 05, 2006, 08:38:00 PM »
I thought about doing the same, except in my case instead of writing the school a check for tuition, I would charge it on my card and just wait a year to pay.  But the danger (from what I'm aware of) is any negative marks on the credit report will cause the rate and fees to skyrocket.  As tempting as it may, I know playing with credit card is almost like playing with fire -- it takes skills and disipline that they are banking few people possess.

Good luck.

Momo09 if you have the cash to write a check for tuition you could probably play the game.  Just keep your money in the bank and pay the cc off immediately if the rate raises.  But I guess there are more variables and it is not this simple. 
Having cash does seem to change the rules a little...



even then I hesitate.....
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bachismo

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Re: Risky business
« Reply #5 on: July 05, 2006, 08:53:18 PM »
Many cc offer 3.9% on balance transfer for the life of the balance.  They cannot simply raise the rate.  It's 3.9% unless you default.

Momo09

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Re: Risky business
« Reply #6 on: July 05, 2006, 09:30:18 PM »
Many cc offer 3.9% on balance transfer for the life of the balance.  They cannot simply raise the rate.  It's 3.9% unless you default.

They are banking on people defaulting.  All it takes is a few...
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bachismo

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Re: Risky business
« Reply #7 on: July 06, 2006, 08:24:44 AM »
You gotta know when to hold 'em, know when to fold 'em, know when to walk away.

Butch

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Re: Risky business
« Reply #8 on: July 06, 2006, 07:13:26 PM »
Lots of reasons:

 - No in-school deferrment
 - You can't defer credit cards in the future if you have problems
 - Miss a credit card payment by 1 day and they can jack up your rate (usually this is a condition of the balance transfers)
 - I think it affects your credit rating differently
 - Outrageous late-fees

queencruella

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Re: Risky business
« Reply #9 on: July 06, 2006, 07:29:07 PM »
While 3.9% for life sounds great, with banks and credit card companies merging and being bought out all the time, it just seems likely that the 3.9% may be subject to change. Also, if you go for some other type of loan later, having a student loan will be seen much more favorably than having insane credit card debt.