Readers are still weighing in -- always passionately, oftencreatively -- on some recent columns about the pros and cons of"credit-card hopping," or moving balances from one low-rate card toanother.
But before I share more of their responses this week, I feel Imust paraphrase TV's "Mythbusters" and say, "Give me a break. Don'ttry this at home."
Even though these plans appear to be working for the readersinvolved, I do not recommend them. I still believe the risks are toogreat.
That said, I do find these ideas fascinating. For example,consider the plan devised by Allen.
He wrote in to say that he and his wife have been takingadvantage of low "teaser" rates on credit cards for about two years.
"Right now we're 'floating' a bit over $50,000 on 12 creditcards, and it is ALL at 0 percent interest," Allen wrote. "About amonth before the interest kicks in, we have been able to move it toa new card with 0 percent interest and, so far, we haven't had aproblem finding a card with very low or no fees to transfer."
He goes on to write that he has used the money to pay off a homeequity loan "and the rest is sitting in a money market earning about5 percent. We've chosen to leave the home equity loan open in casewe can't find a new card to move the money to in the future. Isuppose one could use the interest saved and the interest earned toincrease lifestyle as long as you aren't using the principal toincrease lifestyle. We have chosen to apply the interest saved onthe home equity and the interest earned on the money market to payour house payment."
Allen includes the caveat that such a plan requires a person whois "very detail-orientated, very disciplined and has a good creditscore to start with."
"It's not a gift of money, just really cheap (no interest)money," he wrote. "The only downside is our credit scores havedropped from the high 700s to mid-600s, so you don't want to do thisif you need to keep your scores up."
Another reader, Larry, has a similar plan. After throwing awaydozens of credit-card offers, he decided about three years ago togive them a try.
"I applied for the offer, and it was 0 percent interest for 12months," Larry wrote. "This sounded too good to be true, but I wasgoing to try it. I applied for the offer, and my credit line was$10,000. ... I called the credit-card company and told them that Idid not have a balance transfer that I wanted, but I wanted $10,000deposited in my checking account. They replied that this could bedone and were delighted to send me the money.
"The fine print stated that if you went over your credit limit ordid not make a payment on time that the rate would go to somethingaround 18.9 percent interest. They told me there would be a $15 feefor the transaction, so I had them directly deposit into my checkingaccount $9,950 and with a $15 transaction fee the total would be$9,965, which was under my credit limit of $10,000."
Larry remained skeptical, but everything went as planned.
"On this initial offer the monthly payment was $15. ... Knowingthe exact date that the offer would end, I put my $9,950 in aninterest-bearing CD at around 4 percent interest, and at the end ofthe year I liquidated my CD and paid the credit card off. I couldnot believe it. They then sent me another offer, and I decided toask for an increase in my credit line, which they gave me."
Larry wrote that since that first experience, he has borrowedfrom several different cards, up to $110,000 at one time.
"Most companies now charge a 3 percent minimum fee and a maximumof $75 for these type offers," Larry wrote. "I simply ask them tosend me a check to my checking account, and I pay the monthlyminimum of around 2 percent now, and put the money in an Internetchecking account, which currently pays 5 percent interest. This is aliquid account unlike a CD, and if for some reason something goessouth on an offer, I simply pay the credit card company off.
"Well, after three years of taking these offers, I have yet tofind a flaw in this. It is kind of fun knowing that I am gettinginterest-free money from a credit-card company. I also make sure Iknow the exact day that the offer expires so one day before theoffer expires I pay the full amount off. I often wonder if thecompanies are tracking people like me, but it doesn't look like theyare, and I am still receiving offers from credit-card companies."
Well, Allen and Larry, I think your plans require far more effortand concentration than I am willing to put in. But you certainly didpique my interest, and, no doubt, the interest of readers who havebeen following this issue.
If other readers have similar stories, tales from the negativeside of card hopping or unrelated financial questions, send them togkratz@desnews.com or the Deseret Morning News, P.O. Box 1257, SaltLake City, UT 84110.
E-mail: gkratz@desnews.com
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