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Frequent Contributor
I am wanting to get a credit card to develop a credit history, but i dont want to use it. So i was thinking the card gives me 55 days free credit, so if i transfer the cash to may trading account and then pay it back 54 days later and repeat the process i can make interest on this money... Any errors in my thinking ?
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33 REPLIES 33
Not applicable
Yip, 55 days does not apply to cash withdraw/transfer transactions. Interest on cash immediately starts accruing from what I remember. Is this not "using" your card anyway? (you said you wanted it but did not want to use it)
Other thing is what happens if you "loose" that cash in your trading/investment account? You could buy shares and the value could plumit in 47 days (remember you have to sell share and wait the 5 days to settle cash for transfer - yes you can request early settlemnt but you pay a fee for that)...long story short to much temptation even for the strongest of minds.
Rather get an edgars (or other similar preferance store) 6 months interest free account buy a few small items and pay them back every month interest free for 6 months. request the same MINIMUM credit balance you wanted in the CC.
DO NOT FOR ANY REASON EVER INCREASE OR AGREE TO INCREASE YOUR LIMITS!!!!. If you dont have the cash to settle it at month end you wasting your time.
I started that way (after I learnt the lessons of a CC the hard high interest way) and my spouse did this and in 6 months we had a brilliant credit profile (admittedly a while ago though when we started this routine), and now can access almost unlimited (within affordability means) money if needed. Nice thing is we never had need to access extra capital but the ground work is their if we ever need it.
Hope this helps.
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Not applicable
I know store card say 6 months interst free and the "interest" is built into the price anyway (never could figure why I could not get a really good discount at Woolies or Edgars if I paid cash rather than account - thats another story), but you need clothes (never buy food at woolies on account - ugliest thing I could personally think of, buying food on credit. If you cannot afford the price shop at a cheeper store for better food prices.... again another story) and other personal items so you may as well use a 6 month period (and you have to be diciplined) to pay it off. Better yet buy now pay at month end and settle the account early. Extra bonus points in credit profile. OMO but it worked for me.
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Highlighted
Super Contributor
I use my credit card as a convenient way to pay for everything. I buy everything on my credit card and when the statement comes, I pay the full amount. And because all of this happens within the 55 days, I don't pay interest on the amounts. This has given me such a good rating that the bank will give me a credit limit twice my monthly salary.
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Super Contributor
Stop fooling yourself.
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Super Contributor
Salv. Credit rating is only one aspect of the bigger estate planning issues. All aspects must be taken into consideration.
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Not applicable
Thats where the banks "tie you into the hand cuffs" (interest rates etc) they not showing you to start with. If you have to spend 2x your monthly salary on CC how do you pay the amount back at month end? Dont even try rationalise it with "I can pay the remainder off the next month.". You still will spend that coming month and add to the balance. If you dont pay the full balance off you pay the interest on the amount outstanding and so the cycle starts. Only ever have credit to a max of 70% your salary. Thatway you cannot over spend. OMO.
BTW My bank phoned me this morning offering to increase my CC limit (straight and budget to a total of 200k - Me thinks not!!). I turned them down.
Consultant was rather suprised and asked why I would not want extra available for the comming Xmas season etc. Well I think you can see the answer already. Bank so desperate to make up lost fees they will start pumping client with "offers" again. But I declined it anyway.
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Super Contributor
If the transaction is casg the charge you interest and finance charges on the ammount. if the transaction is for products or services they dont charge you finance charges..read the fine print!!
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Super Contributor
Apart from Simon Holy Grail seminar at R1000, credit card is the biggest ripoff. What the bank do not tell you is that fees makes up a small % of the income generated. The trick lies at the rate at which the bank get funding ie 8% and the rate it lend it out i.e 18%. Salv if you want to develop a history make sure that you alway have cash in your account (your cash and not banks cash)
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Super Contributor
and included in the interest rate gap is the cost that you are carrying for other bad payers/bad debts.
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Super Contributor
The system could be tested and could be a good arbitrage opportunity to make that little extra
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Frequent Contributor
never gamble with other mans money. save your money then get into the market. you will make beter disissions when you play your own money.
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Frequent Contributor
Thanks for the feed back. When i said i dont want to use it i meant i dont want use the credit for additional spending, the idea would be to transfer it into my trading account not to trade with but rather to earn what ever interest i get in the account for having the cash there. The trick i guess is understanding what the transaction fees are, aswell as clarifying if the 55 day interest free period is included if i transfer the cash as a "payment". So if i have a R5000.00 limit, i transfer all 5000 today leave it as cash earn interest for 54 days and then pay then pay it back. Todays later i repeat... Its a very small return but if it works in principle then as the lending amount increases so the return does, and you then making a little money for doing even less...?
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Not applicable
Again, you cannot ever tell me the dicipline not to use that R5k n a "sure bet" trade wont take hold of you? What happens when that "sure bet" goes against you? How you pay the money back? Dont fool yourself banks are EXTREME LOW RISK lenders. they have thought of all these little "tricks" before they gave joe public the product. Cash transfer is Cash transfer no matter how you disguise it.
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Regular Contributor
Assuming all other variable remains constants. Do you think you will have a positive NPV ,if you add up all your income from this arbitrate methodology and then deduct the annual card fees. The bank will always have the edge. Drop that idea and stay away from debts or any inkling that might lead you to possible future debts. My opinion , if you want to make money , that rather attend Simon Holy Grail seminar, it could help you with your trading. ( This comment is from Preston)
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Not applicable
The 55 days payment grace is to rope you in so that you become dependent on the card. Ok let me explain, you use R20k every month and you pay it back in full every month, meaning at the end of the month you always owe the bank R20k. You can't pay it off now coz that would mean you have to spend R20k less the following month (using your own cash). With this loop that they have you in, you will only be one unexpected emergency away from debt. And that is how they get even the best of them in the debt trap. From a business point of view, why would anyone f\give you free 55 days interest? Unless they have something to gain in the long run.
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Super Contributor
I thought there was a rule that says " never trade with borrowed money"
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Not applicable
So who follow the rules, isnt there another rule "rules are ment to be broken" ? ;-)
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Regular Contributor
The problem with modern society is that you do, unfortunately, need a good credit rating. There are very, very few individuals who are in a fortunate enough position to buy the main necessities in life (car, house) without credit. I never used credit at all when I started my adult life, and with a good full time job, my first car loan (for an Uno - so no extravagance) was declined due to no Credit History. The only way to get a Credit History is to borrow... DISCIPLINED use of credit is, unfortunately, almost a requirement for negotiating modern urban life
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Super Contributor
I traded with money from my credit card. I lost. The cred card has been maxed for the past year!!!
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