Quick question for you math geeks (compounding interest) also scamming a credit card

[Leland Pate]

Ha! I bet that last bit got your attention.

Do credit cards compound their interest daily or monthly?

How about a typical auto loan?

I'm trying to decide the best way to pay for a motorcycle if I find one.

The interest rates for used bikes are so high (like almost 8%) that I'm tempted to put the bill on my credit card. If I can find a way to make it a purchase (10%) vs. cash advance (13.4%)

The advantage being that there would be no lien if I put it on my card. That makes it easier to take it out of country but more importantly makes it easier to pay off sooner. Loan companies make it as hard as possible to pay on the principal only. They want to drag it out as long as possible. With my CC card, I can apply money in large chunks without that being applied to the interest every time.
Additionally, I am going to be getting several large chunks of travel pay all spring long. You gotta love TDY per diem. So, I can pay this thing off pretty damn quick.

The tricky part is to get it where the funds are used as a purchase and not a cash advance, 13.4%.

A friend suggested using paypal to launder the money back to myself to avoid the cash advance rate. Of course, you then need to figure in the $2.9% paypal fee (~$174.00, each way)I have no idea if this is legal or not. I've given it some thought and can't see any reason why it shouldn't be, but I've been wrong before.

Anyway, I didn't mean to rant. I was just wondering if anyone knew how they compound the interest so I can crunch some numbers.

[Joeaksa]

I tried to take my BMW financed BMW bike to Germany and they would have nothing to do with it. Until it was paid off it was staying in CONUS, period.

You are still in, so you might try the Federal Credit Union for rates. I used them for a while then found another credit union that was better.

Joe

[Leland Pate]

That just figures, don't it, Joe.

The problem with the Credit Unions is that they don't want to touch a bike that is older than '03.

I am looking at a few '98's and a '00. I have some money to put down ~$2K. So, I am only going to be financing no more than $5/6K.

[K.B.]

Credit card companies all do it differently. By law they are supposed to tell you what it really works out to be APY. Check out credit unions for the best rates. The paypal thing sounds like check kiting which is illegal.

[Joeaksa]

Lee,

My credit union would do used. They even financed my '85 911 when it was over 10 years old. Might check around a bit.

Joe

[pbs911]

You get a much lower rate on balance transfers. Sometimes CC companies will waive any interest for up to a year on balance transfers. Even when the interest kicks in it is very low at about 1-2%.

So here is what you do.

Take a money advance on one card. It will cost you about $50 for the advance. Buy the motorcycle. Then do a balance transfer onto another credit card. There, you now have a lien free motorcycle with only the interest of a balance transfer. That is how I did it.

[tabs]

Elementary my boy....have 2....T...W....0...Credit cards...One that currently offers a permanently low APR for Balance transfers..... Use the cash advance on one and then transfer the balance to the lower rate.... I have as low as 2.99% for the life of the loan recently....Its almost like why pay off the cheap money....

[Leland Pate]

Thanks for the info guys.

I did some search on check kiting and from what I can tell this is different.
Here's what I found on google.

Check kiting is among the most common, and most dangerous, forms of check fraud foisted upon financial institutions. A kite is a form of shell game using at least two accounts at separate financial institutions. The common practice of allowing depositors to have immediate use of uncollected funds facilitates the scheme. Indeed, Regulation CC mandates early access to deposited funds. In the typical scheme, an NSF check is written by the malefactor on one account and then deposited into an account at another institution. A check drawn on the second account is then used to cover the resulting overdraft on the first account. Taking advantage of the float caused by normal delays in the collection system, the wrongdoer creates fictional balances in each account and uses these balances to obtain cash advances.

I would not be floating anything. I would merely be using paypal to get the "purchase" APR instead of a cash advance APR.
If it's illegal or improper, I wouldn't do it.
Thanks again,

[gavinlit]

Use two cards. Purchase on one, wait for your one month interest free then do a balance transfer over to another. Over here there's plenty of companies offering a 6 month interest free period on balance transfers. This way you effectively get 7 months interest free. If you want to be unscrupulous just keep transfering the balance to a new company every 6 or 7 months. When you get sick of this you could take out a personal loan to cover it.

[Dave L]

I would get a line of credit, I have bought out a lease and purchased both my 944's this way. I dont have to go to the bank and ask if I can borrow money and the interest rate is very low. Otherwise, as others have suggested, take the cash advance then transfer it to the other card.

[dafischer]

Originally posted by gavinlit
Use two cards. Purchase on one, wait for your one month interest free then do a balance transfer over to another. Over here there's plenty of companies offering a 6 month interest free period on balance transfers. This way you effectively get 7 months interest free. If you want to be unscrupulous just keep transfering the balance to a new company every 6 or 7 months. When you get sick of this you could take out a personal loan to cover it.

Unscrupulous? I'd call it good business. If a credit card company wants to offer me 0% on a balance transfer of a significant amount, I'll be glad to take them up on it. They'll take you any chance they get, so if I get an opportunity to do them first, I'm in.

Last May, I found the Targa that I wanted before I sold our Harley ("suggestion" from the wife) and was able to write a check on one of my cards that offered 0% for 6 months on checks and balance transfers. I hadn't sold the Harley by last November (I was really trying), and I wrote a check on another card that offered 0% on balance transfers until this October.

Net result is I've owned the Targa interest free, save for $150 in check fees. And the monthly payments have been low, since the new minimum payment requirements are based on accrued interest, currently zero, for the period, and only 1-2% on principal.

Anyone want to buy a Harley Dyna Wide Glide?

[pwd72s]

Lee, wanting it now is an easy thought process to fall into. But why not save the bucks, avoid the interest, and buy the darn thing for cash? I know, I'm an old fart...what do I know? Well, I do know one thing. Financial happiness is when others pay you interest, and you pay none. It took me a while to learn that one. Add up your current debt load...car, house, boat, guns, pool cue , whatever...ignore the pricipal payment...the amount that actually reduces your debt. Pay attention to how much you lay out in interest alone. Each week, month, year.... Pretty hefty chunk of change, yes? Then think about how much depreciation in value everything other than a house undergoes. Another hefty chunk of change. Your money, your desires. I'm just urging you to think about it. Once you get ahead of the curve, paying cash while being out of debt, you'll be amazed at how much further your money goes.

[Leland Pate]

Oh, I hear you, Paul.
And I am fully aware that we as American's fall into the "I deserve/I want it now" catagory.

I am just as guilty of this as the next guy.

And you're right. I do want it now.
The good news is that I sold my house and we pretty much made a killing off it. I was utterly shocked that we came out so far ahead after only living here for 2.3 years.
The wife and I want to put that money in our Mutual fund (Sequoia Fund) for the next house purchase in a few years.
But, she doesn't have a problem with me taking a tiny bit off the top for something cool (like a bike). So, I'll probably take a grand or two from our house sale and pay off the bike here in June.

But, I do want it.

And you're pool cue is still displayed proudly at social functions.

[Dantilla]

I'd look for a bike for the two grand.

Sure it wouldn't be as nice, but any bike is still fun.

[pwd72s]

Originally posted by Dantilla
I'd look for a bike for the two grand.

Sure it wouldn't be as nice, but any bike is still fun.

Yeah, like a Vespa? On a recent (rare here) dry day, I saw a young couple out on one. I was jealous! Lee, Good that you're in a mutual fund. Ever visit Morningstar, compare their performance against others long term?

[YTNUKLR]

Fidelity.com also has mutual fund research info that's very helpful, and Morningstar ratings.

[Leland Pate]

My second choice was a Bulltaco!

[pwd72s]

Originally posted by Leland Pate
My second choice was a Bulltaco!

Lee, Bull taco too tough! Ask for steer taco instead.
BTW, when comparing funds, you might also check out the Vanguard family. They offer some excellent perfoming no load funds that have amazingly low fees.

[Groesbeck Hurricane]

Leland,

USAA, it is the only way to go!!!

[Dantilla]

Originally posted by pwd72s
Yeah, like a Vespa?

No, like a used whatever you want. No need to buy new and take the depreciation hit.

Two thousand dollars will buy quite a bit of performance on the used market.