Is there a flaw in this plan?
 

I have been lurking/posting in the Marriott forums for a decent while now, but have just (last night really) gotten into the CC game. I would love it if someone with more knowledge than me could tell me if this idea would work for me, and/or general thoughts on the idea. Please bare with me while I explain my situation.

I have recently bought an engagement ring for my fiance, and have been making payments on it monthly. Long story short, I was under the impression that I would have 0% interest on it for 1 year. Well since I had been making the payments early in-store, I did not receive a statement until last month, and noticed that I am being charged an awful interest rate. I called the phone number on the statement but they basically said that according to their rules, I wouldn't have qualified for interest-free financing based on what I put down at the time of purchase and they couldn't do much for me. I've been too busy with work to stop by the store, but have planned on doing just that.

Which leads me to the plan I just thought of due to my entrance into the churning game. I signed up for both the Citi AAdvantage Visa & AMEX which both have $3,000 minimum spend amounts, and the US Airways Premier World Mastercard, which (in addition to the other bonuses) offers 1 point/$ balance transfer, and offers a 0% APR on balance transfers for the first 15 cycles.

I'm thinking that if I go to the store, and make a $3,000 payment on both Citi cards (plus the remaining balance on the ring), I could then do a balance transfer from both cards to the US Airways card, thereby fulfilling both spend minimums on the Citi cards and getting an extra 6,000+ points on the US Airways card.

Does anyone see a problem with this idea?

**That was the meat and potatoes version of the plan. Before anyone says anything, I know that the US Airways card charges a 3% fee on balance transfers, but I have calculated it out and I will still save several hundred dollars in interest after taking into consideration this fee. So basically this is a win-win-win, if it works. I will save money on interest, I will fulfill the minimum spends on the Citi cards, and will earn the extra balance transfer points for the US Airways card. I only wish my student loans could be paid by CC!**

Also, another general question, not necessarily related to CC Churning, but maybe some of you more experienced individuals may know. What is to stop someone from getting multiple CCs with 0% introductory APR on balance transfers, and slowly pay off their debt, and transfer the debt to a new card once the 0% introductory period is over? Obviously you will pay fees each time, but that will come out a heck of a lot cheaper than paying 17%+ interest over the life of your debt. Anyone have any thoughts on this?

Nothing. People do it all the time.

As for your initial quesiton - the only problem I see is spending too much on the ring ;)

First, a disclosure: I have never done a balance transfer, so I can't respond to those implications. I'll let those with more experience handle that portion.

My thought: What is you plan for AFTER the US Airways card? Can you beat the interest rate with a HELOC or a personal loan, whether secured or unsecured? I would encourage you to think beyond just the credit card movements. Perhaps you should apply for a line of credit/loan first.

That's what I'm talking about. Now, you're thinking beyond just the miles!

Interesting. I just really never thought about it I guess. Maybe a lot of people just don't know about it? Another perk of spending so much time researching for points is that you learn about these other things, which are often more important/valuable.

Haha I knew someone would make a comment like that. I did my research and made sure not to buy a ring outside of what I could comfortably afford. The problem was that I initially thought I would be paying 0% interest, and would like to save $500+ dollars if it really is this easy. Thanks for your concern though :D

Another reason why I love these forums so much... I really appreciate the concern, and I mean that whole-heartedly.

The 0% introductory period is 15 months, and I plan to pay off the ring way before that. I was actually considering paying off the ring in the next month or 2 with a couple lump-sum payments once I found out about the interest rate. However, if I can do this balance transfer and take advantage of the 0% APR, while also fulfilling a few CC requirements, and not have the headache of trying to use reloadable cards or Amazon Payments, it seems like a winner all around.

I would disagree that you purchased a ring you could afford if you did not have the cash to pay for it out right. The credit card companies love people whom carry a balance. even at 0% introductory rate. something will happen and the person will be too busy with somthing at work or something else and the fees will start racking up.
your math in the above caluculation is flawed there is no way to save 500+ on anything with 0% interest rate. only if the rate was negative could you actually save money paying over time.

This was a great idea back when they didn't introduce balance transfer fees...

With the fees of 3% and up per balance transfer, it's just not a smart idea to carry over any balance if it can be avoided.

Btw there are some cards still that have 0% intro APR and 0 balance transfer fees like the Chase Slate.

You are certainly entitled to your own opinion, however flawed it may be. If you had the option to shell out $6,000+ in cash, or pay that balance off over time and pay 0% interest while doing so, I would argue that it makes no sense to pay it off in cash outright. I could take that money and invest it elsewhere and make money. Yes, if you are irresponsible and forget to pay it off before the 0% period ends, then of course it was a bad decision, especially if you could have afforded to pay it in cash right away. However, I had/have every intention of paying it off before that period is up, and in the meantime my money is working for me. I don't think you should automatically assume that you know my entire situation, and jump to the conclusion that I made an irresponsible decision or that I could not afford to pay for it outright.

Here, though, you are completely incorrect. I am currently paying 24% interest, so if my 2 options are to keep paying that or transfer the balance to a card with 0% interest for 15 months, and pay it off in the same amount of time under both of these options, I will save a SIGNIFICANT amount of money under option #2.

If you have cash to pay it off in a lump sum within the next month, why would you want to pay 3% ($180) for balance transfer? I agree to use AA cards for 6000 miles and meet min. spend on those 2 cards, but I would never pay $180 for balance transfer. You can meet that min. spend easily without losing $180.
Lesson hopefully learned...Always read the fine print before agreeing to anything;)

That is true, and it would definitely be a more valuable option with no balance transfer fee, but in my situation, and certainly others, it can still be a smart move. For instance, my balance transfer fee would be just north of $200, but my savings will be $500+.

Good to know about the Chase Slate though. I will definitely look into that, and if I hadn't just done an App-o-rama, I would probably jump all over it. As it is, I will probably stick with my original plan in order to save a few hundred bucks and fulfill the requirements of the CC offers.

Thanks for the input!

I'm glad you pointed that out. I don't know why I had exclusively thought of the balance transfer as part of using the AA cards. That would probably be a lot smarter move. I guess I would essentially be paying ~$200 in fees for 6,000 US airways points, which I'm thinking is way too much.

Stoozing is sooooo 1996

balance txfr fees make it not worthwhile imo

but some 0% 0 fee offers occas come up still, just super small

What is stoozing?

I will agree with you that you will save significant amount of money paying a 3% balance transfer and paying it off before the 15 month intro rate is up. i caution people about taking out any credit if they have current debts at 24%. I understand there was a misunderstanding and you had not intention of having this high of an interest rate, you probably fell into a trap from the ring store/ finanacing company. let me tell you the credit card companies have many of these same traps, maybe not as bad as this one but the reson they offer these big bonuses for signup is they understand how to set traps for one who does not pay attention to details, and they count on peoples lifes being busy so they wont take action right away and they can continue to collect from you.

i am not hear to judge your situation but rather to try to help so that you dont spend more in interest from these cards than the benefits of the miles.

I undertand having your money working for you while you pay zero interst, in fact a few years ago you could get a 5% on saving account via washington mutual, charge up a bunch of mint coins tranfer the account ballance to zero interest credit card and deposit into a 5% earning account. i would be hard pressed to ever earn a rate near 24%.

Before you do this transfer, i would contact the ring store and find out if they have a prepayment penelty on the current plan you are under. i would not put it past them especially if they are currently charging you 24%. I would also verify if they will accept a credti card to payoff the balance. I know the store would have accepted a credit card for the purchase but this is no longer a purchase it is now paying off of a loan. they may charge the credit card as a cash advance, then you will earn no AA miles and get no credit towards the 3000 spend and will be charged a high interest rate from citi.
sometimes digging out of a hole can casue you to be in a bigger hole

Why are there only two options? Earlier you indicated that you were considering paying off the balance in the next month or two, that would be option #3.

The amount of money you "save" is really of no importance. What you need to determine is the opportunity cost of the cash today vs 15 months from now. If it's just going to sit in the bank, there is no way you'll earn enough interest to cover the 3% BT fee. Since you're paying it off in a year investing the cash would be quite risky (same reason why retirees reduce exposure to stock market). Also consider that if you can't pay cash today, but you can pay it in 2 months you will have incurred $240 of interest. If the BT lets you get out from under the interest at least 1.5 months early you break even on the BT fee. Although if you put it on your CC you'll get at least 30 days of float.

Other things to consider, check to make sure that payments to the store will count as purchases and not cash advances (since you're technically paying off a debt). Is it possible to return the ring? If you're not planning on proposing for a few months you could buy it at a later date and save the interest in the interim period. I also wouldn't be surprised if they become a little more flexible with the prospect of losing a sale.

Last thing, if your credit is good enough to churn CCs, why would store financing reject you for 0%? It is my impression they are much more liberal with their credit as it is tied to making a sale. Seems kind of odd.

Ring stores, furniture stores and used car dealers make a large amount of their money on their financing "we can finance anyone" so even with great credit they can charge what they want to and place early payment clauses and late payment clauses into the deal to maximize profits.

Wow, I learned something new today...

http://en.wikipedia.org/wiki/Stoozing

But if you're going to offer 0% financing as the OP indicates, one would think that those with the best credit would be the ones receiving the 0%. I'm not disagreeing that their financing is a terrible deal unless you're on a promo, but if no one qualifies for it, what good does it do? The bait and switch on financing seems very destructive to prospective deals.

Maybe OP can share why they refused him the 0% financing and why they didn't disclose it to him when he made the purchase.

Bait and switch can work very well in the "once in a lifetime" type of purchases. and an engagement ring is supposed to be exactly that. they are not really looking for repeat customers.

Good point. Actually, I have a feeling that you can't use a credit card to pay off a jewelry store credit balance.

Any pics of the ring?:p

Haha wow this thread has really taken an interesting turn. I've been gone for a little over 2 hours and have a million questions to answer :D I'll do my best to answer them all in one post, and I thank you guys for sticking with me!

First of all, sorry for getting a little defensive previously, it's just that I work in the finance industry and tend to take offense if someone assumes I am irresponsible with my money. Thanks for continuing to comment and I appreciate the concern. That is a good thought about the prepayment penalty. I don't think there is one, but I will definitely look into it. As far as accepting a credit card for payment, I do know that this is allowed. This was one of the benefits that they mentioned to me when I bought the ring. I could get the 0% interest through them (so I thought) and pay each month with my American Express and get points. I have made several payments this way so I know that is ok, and doesn't come through as a cash advance.

There aren't only 2 options, I was just playing devil's advocate for the sake of my original question about doing the balance transfer. I am now considering putting the balance on the 2 Citi cards and then paying them off within the billing cycle, thanks to Skibum pointing out that option.

The money won't just be sitting in the bank. I'm sure I am going to get called out for saying this, but I'm involved in an investment venture that averages a 35% return/year. I have not been involved long term, but it has been solid for the past few years. To answer the questions I know are coming, no it is not a Ponzi scheme, and the reason I am not rich and thus care about CC churning is b/c I don't have enough excess capital at the moment to make this a large stream of revenue.

See above re: counting as purchases and not cash advances. As far as returning the ring, I don't think my fiancee would be too keen on that ;).

For the question that you all seem most interested in, why I was rejected for 0%... I wasn't exactly rejected for it. When I bought the ring, the store clerks made it seem like it was just something they were offering, no qualifying criteria. I assumed that I had the 0% for the first few months, as that's what I was told off the bat, and I was making the payments early in the store each month, so never got a statement (don't ask me why). Then one month I was busier than usual so I didn't get to make the payment early and received a statement. This was when I realized I was being charged the ridiculous interest rate. When I called the number on the statement, I was told that the store clerk must have been mistaken and that in order to have qualified for the 0%, I would have had to put down X amount, when I actually only put down Y amount. So it isn't that I didn't qualify credit-wise, it's that I wasn't told how much I needed to put down in order to qualify.

See above re: using the credit card.

I could post a pic if you are really wanna see :D Can't read sarcasm on here lol

Sorry, my response was to a comment above that is out of place when read in its location now. Carry on.

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