My credit card company has recently offered me 0% interest on my card through 
October. Additionally, for a 3% fee, CAPPED at $40, I can get a cash advanced 
at 0% interest. My credit limit is $4000.

In effect, for a fee of $40, I can get $4000 to play with for free until 
October.

I checked CD rates and they all are around 1.3%; that's $90 interest income 
after 60 months, less the $40 fee gives me $50 profit. Not quite worth all the 
effect.

If I had a "reliable" stock tip I would put the money there. That's pretty 
shaky ground, though.

If I charge something to the card, it's 0% with no fee at all until September. 
Wish I could put my rent on the card :-)

What's the best use of this low-cost (or, if charged, free) six-month loan?

---

Clarification of Question by pnoeric-ga on 22 Apr 2002 11:50 PDT

(Actually, charging my rent [or anything else] to the card effectively means 
the 'free money' that I would otherwise spend will stay in my checking account. 
So the profit I earn is the interest rate on my checking account, and only for 
the amount I can effectively charge-- even though I don't pay the cash advance 
fee in this scenario, the lower interest rate ends up making it worse than the 
money market fund example above.)

Hello!

After consulting with a credit card "expert," you should consider the
following:

The first thing that needs to be understood is that we should not view
any credit card funds as "free money," even if we are given 0%
interest from credit purchases or cash advances for a limited time. 
The 0% interest rate will eventually expire, and if you still haven't
paid back the $4000, watch out!  Credit card companies want to make
money, and part of their revenues are generated through interest
rates.  The 0 interest deal is offered to encourage their customers to
spend spend spend.  Using statistical analysis, they rely on the fact
that customers do not often pay back the sum of their credit purchases
within the period of the 0 percent interest rate, and thus they'll be
able to generate pretty good revenues from the high interest rates
that will inevitably kick in, once the 0 percent interest offering
expires.

Logically, if you are given only a 6 month grace period, the only
investment that will yield a high surplus in a short period of time is
in the stock market.  This is a high stakes games where you are taking
a risk using money that isn't really yours to begin with.  Any other
"safer" investments will take much longer than 6 months to yield a
respectable return, so I wouldn't view those as an option.

If you have an interest in starting a business, there are FAR better
loan programs to pursue than using credit card funds, and many offer
very reasonable interest rates as well.  Starting a business is
undoubtedly a long term project, so it makes sense to fund that
project using a long term loan with low interest rates, rather than a
short term loan (e.g. credit cards) that may briefly offer 0 percent
interest, but will punish you BADLY in terms of HIGH interest rates in
the long run.

The answer actually lies in changing your perspective.  The only money
you should "play with" is the money that belongs to you and you alone.
 In this regard, consider this suggestion:

Draw up a budget of your expenses, and find out how much money you
have left over when all is said and done.  See how much money you can
save per paycheck without missing it, and then funnel that money into
a savings account or CD.  If you want to save more money, see what
concessions can be made in your budget in order to maximize your saved
money, even if it's for a limited time.  If you can make concessions,
a budget of saving 100 dollars a bi-weekly paycheck can easily go to
300 dollars with creative thinking and planning.  I've done this
before.  There will be periods will you will sometimes be able to save
more money than you usually do.  It's important to take advantage of
that.

In addition, make a game out of saving.  Instead of thinking you have
4000 dollars to spend, pretend that you OWE 4000 dollars and that you
have till October to pay it off!  You will be amazed at how much money
you can save under those circumstances.  Even if you only managed to
come up with half of that, (2000 dollars), that is a 50 percent yield
of a 4000 dollar investment.  And it's all yours.

To sum up (no pun intended), the only "free money" out there is the
money that you earned.  :-)

Hope this helps!

This is not a researched answer, but one based on my general experience of the 
world.

I smell a rat, here: there is no such thing as 'free' money.  If something 
sounds too good to be true, it PROBABLY is!

My instincts tell me there is something wrong with this deal - have you checked 
the fine print to see EXACTLY what the terms and conditions are?  Are you sure 
you would not be penalised later (e.g. in higher interest rates on transactions 
AFTER October)?

Are you sure you wouldn't have to agree to a certain minimum value or number of 
transactions on the card, to qualify?

My advice is to be VERY careful.  If you've checked the deal twice, check it a 
third time!

If it's as good as you claim, people would be flocking to it in their 
thousands, and it's difficult to see how the card company would make any money -
 except by locking these people into a deal that has punitive rates of interest 
later on.

Obviously, you should NOT reveal any of your credit card details here, but have 
you considered a web-search of the Financial Press, for an independent comment 
about how good the offer REALLY is?  If the terms are as generous as you 
suggest, I would certainly expect it to generate interest (no pun intended)in 
specialist consumer finance journals.

Sorry this doesn't really answer your question, but I just don't like the sound 
of it....

Better to be safe than sorry.

Louise

First off, I'd say that the market is a poor gamble for only 6 months. You 
could end up losing a significant chunk of that $4K, and then you're out $40 
plus whatever else. Dangerous stuff. I just spent the weekend in Las Vegas, 
where the odds are about the same (except for the change machines, which have 
great odds!).

CDs don't seem to be worthwhile, like you said. The best 6 month CD rate 
according to Bankrate.com is 2.96%. Subtract your $40 plus the income tax 
you'll have to pay, and... well, what's the point?

Here's the best deal I can find. NetBank offers a $50 bonus when you sign up 
for a Money Market account. Interest is about the same as a CD (2.71%) but 
there is no minimum balance. But remember, you have to keep the account open 
for 6 months or they will charge you a $25 fee.

https://secure.netbank.com/index.htm

Thanks for playing "Beat the System." Is this fun or what? 

(PS: I have an application in to be a researcher for Google Answers. If you 
like my answer, it wouldn't hurt to let them know ;-)

(PPS: In response to Louise's comment, the "catch" is that most people don't 
pay back the cash advance within the alloted time, and then the credit card 
company gets to start charging heavy interest. Crafty folks like pnoeric are 
the exception, not the rule.)

Hi Louise, thanks for taking the time to reply.

In fact, I did spend some time on the phone, nailing down all the details-- the 
3%/$40 fee was something I had to kinda get out of them... but it's true, 0% 
interest for six months. It's actually not that unusual-- I get offers in the 
mail for new cards with 0% promotional rates. The "catch" is, of course, most 
people forget to put the cash back on time-- or more specifically and even 
worse, do something foolish with the money, like use it to pay bills then carry 
a high-interest balance on the card. Bad move!

best
Eric

Danzarin -- brilliant! 2.71% interest nets me $108 profit on the cash in six 
months, plus the $50 signup bonus, less the $40 fee to use the cash-- a profit 
of $118. Even after taxes, we're starting to get close to making it worth my 
while. (After all-- including time to plug everything into Quicken, and put a 
reminder on my calendar for the payback date!-- we're talking about, oh, maybe 
two hours total?)

Anyone else see a way to trump this?

Thanks for the research & I'll send a glowing recommendation to Google re: your 
app...

best,
Eric

http://ericmueller.org

Another user suggested taking advantage of some NetBank deal. For your
own good AVOID NETBANK LIKE THE PLAGUE. I am having a terrible
experience with them, and a search for Netbank on Epinions.com yields
some pretty disturbing reviews.

It appears like funds have disappeared from my account so I sent
NetBank a request to explain the discrepancy. They replied that it
will cost me $25.00 per hour to research this problem (and they didn't
specify the number of hours.) This seems criminal to me. Recently I
discovered on the web that many other people are having similar
problems with Netbank. I don't know how to proceed, but it seems like
someone should do something to ensure that NetBank treats it's
customers more fairly.

Here is a copy of the correspondance mentioned above: 

To: 210684@service.netbank.com
Date & Time: 4/22/02 3:38:24
PM (US-ET Zone)
Subject: Other 
Message: 

Dear Mr. Hodges, 

To better assist you we do need further information into how far back
your were trying to balance.

Please be advice that there is a $25.00 per hour research fee. 

If you have any questions please feel free to 
contact us at 1-888-256-6932. 

Thank You, 
Anna 
Customer Banking 
Associate 

---Original Message--- 

From: NetBank 
To: Customer 
Service 
Subject: Other 

It appears as if there is an error in computing the balance of my
account.
I have downloaded my entire transaction history which reflects these 
results: 
total deposits: 2678.18 
total debits: 
-2453.99 

which would result in a balance of : 224.19 

but my balance is less than USD$70. Please explain why. Either my
balance is being incorrectly computed, but some transactions are
missing from my account history.

THank 
you, 

Max Hodges

what you could do is start a business.  if you started a lawn service.

you have plenty of time to get enough customers to support any
interest debt

on the money you spend for equipment.  then you can make money all
summer long.

that will trump any interest you are lible to make.  

or if you have an auto loan, you can try to pay it off and cancel any
comprehensive insurance you are paying for.  this will save money. 
but it
depends on your circumstance.

if you are going to go on vacation you can plan in advance- pay for
airfare
and rooms and such with the credit card - thus locking in low rates.
then since you were planning on vacation expenses anyway you have time
to
come up with the money to pay the credit card.

ING Direct offers a 3% interest savings account with no minimum
balance, no fees, and no required period to keep the account open.  In
fact, they will also give you $25 for opening the account if you can
get your hands on one of their bonus coupons.

www.ingdirect.com