Q&A: How can one use their credit cards to invest without the investment qualifying as a cash advance?
Question by Michael P: How can one use their credit cards to invest without the investment qualifying as a cash advance?
Everybody knows using a credit card at the ATM or bank will qualify the transaction as a cash advance and cash advances carry a rather high rate. However today I heard a bit on the news;how to make money off of the credit card companies rather than them making it off of you. It featured some investment guru who talked about using available balances on credit cards for investments that have a higher rate of return than the credit card carries. I have a 0% until July 2007 with plenty to invest if I decided to do this, but how would I avoid the cash advance rate if it would be regarded as cash? Are there any investments that would list the transaction as a purchase? Please help, I am confused.
Best answer:
Answer by foxhound
First of all what kind of investment is going to give you a guaranteed return by July? You won’t even have time for a 6 month CD. And what kind that you can cash out in so short a time?
Investment means risk no matter what. What happens if they don’t pan out as expected? You will still need to pay the credit company. Plus you have to make payments as you go along. In addition 0% in most cases mean that if you have slow payed or have not paid the card to zero by the end of the offer you owe the regular APR retroactively on the previous balances.
There are way to many variables to even consider this as a good idea. Credit is the number one investment in life that one can make and it’s not worth making a few bucks to mess it up. Good credit means you get the best deal in buying a car, car insurance, housing, medical insurance and everything. You lose a bit of money that you saved and invested well you just lost it. Screw up the credit and it can follow you and cost you big bucks for up to 10 years!
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First you must make sure you know what you actually have –
is it 0% on purchases or balance transfers?
In neither case, it would not apply to a withdrawal at an ATM – interest kicks in from day 1 – banks are not dumb!
But for instance – if it is on purchases and if you buy something – and then sell it quickly (maybe on Ebay or to a friend?) and use that cash to invest in say, a 3 month CD earning interest – now we are talking.
I hate to sound like your mom but this is a terrible idea. Borrowing to invest is a recipe for disaster, and these cards are going to spring higher rates, hidden fees and other restrictions on you eating away returns (assuming your investments are positive). You are playing with snakes and going to get bit.
Use the Convenience Checks with low Apr’s that some of the good credit card companies send to their customers. You can write the check to yourself as cash, and cash it at your local bank. You will be charged the fixed APR as listed by the company. Make sure that it is a fixed APR as in 3.9 or 5.9 %.
RD