Home › Forums › Financial Markets/Economics › We’re back…… Using home equity as ATM’s!!!!
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earlyretirement.
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February 12, 2013 at 11:05 AM #759258February 12, 2013 at 11:05 AM #759259
CoronitaParticipant[quote=earlyretirement][quote=spdrun]20% APR what? I pay 10% on one card and they just offered me 0% cash (OK, with a 2% transaction fee) for 13 months.[/quote]
Yeah, exactly. Back during the recession credit card companies stopped (or limited) these low or 0% balance transfer offers. But now they are starting to dole out the money again. Like you spdrun, I’m getting 0% transfer offers with a 3% transaction fee. Some of them are for 12 months but some from Citibank say it’s until the entire balance is paid off!
Granted my FICO is great and my credit limits are extremely high. But I still wouldn’t cash these in and stick it in the stock market. Although, if CD’s were paying 6% guaranteed that would be a different story I guess. 😉
If they are offering these kinds of things to spdrun and I, I imagine they are offering them to many people. What I think you will see with the real estate market going up in many areas with tight inventory, is people cashing these and using it in the real estate market, stock market (margin accounts) or other type of scenarios.[/quote]
Most people won’t get the 0% offers. One they go to the approval process it will end up being closer to 20%, if they have any sort of ding on their credit file.
February 12, 2013 at 11:07 AM #759260CoronitaParticipant[quote=earlyretirement][quote=flu]On second thoughts….Not that I would consider this personally…But I guess someone in serious financial doo-doo…
Hypothetical situation. Let’s say some person has no house to HELOC…. No chance of ownership…Let’s say the person has no savings, no IRA….And has a job that doesn’t really depend on having stellar credit.
But the person has 10 credit cards with $10000 credit line each.
Maybe works out for them is to cash out all credit cards on credit line, and put that money into the IRA….10 credit cards $3000 each say $30000 into an IRA, invested wisely…File BK.
Why? Because perhaps even after one files BK, retirement accounts are off limits.
Not that I personally would recommend this… But just saying….If someone is really desperate.
Chances are, they won’t even go to BK court, but will settle with the collector at much less than owed.[/quote]
Flu,
I wouldn’t be surprised to hear about people doing this! And the thing is, there isn’t anything that could be done to this person besides have bad credit for many years.[/quote]
And you thought leveraging your credit card is a bad thing :)……
February 12, 2013 at 11:14 AM #759262earlyretirement
Participant[quote=flu]
And you thought leveraging your credit card is a bad thing :)……[/quote]Yeah, I guess in that scenario these people will literally make out like bandits!
[quote=flu]
Most people won’t get the 0% offers. One they go to the approval process it will end up being closer to 20%, if they have any sort of ding on their credit file.[/quote]
I’m not sure what % of people are getting these offers. Actually the ones I’m getting aren’t even anything to get “approved”. Citibank is literally always mailing me out actual checks to use up to my credit limit on this one card. And it’s 0% it says until it’s paid off. Not only that but it says that any purchases I make with the card for the next 6 months will also be at the 0% rate if I take advantage of this offer. (so obviously they are trying to push people to use these).
Fee says $5 or 3% of the amount of each check (whichever is higher).
I always just throw these away. I’ve had credit cards since I was 18 with them and always have received them but I don’t ever recall them being 0% until paid off including any purchases after the check is used.
Now I’m curious how many people use these things….
February 12, 2013 at 12:12 PM #759268bearishgurl
Participant[quote=flu]On second thoughts….Not that I would consider this personally…But I guess someone in serious financial doo-doo…
Hypothetical situation. Let’s say some person has no house to HELOC…. No chance of ownership…Let’s say the person has no savings, no IRA….And has a job that doesn’t really depend on having stellar credit.
But the person has 10 credit cards with $10000 credit line each.
Maybe works out for them is to cash out all credit cards on credit line, and put that money into the IRA….10 credit cards $3000 each say $30000 into an IRA, invested wisely…File BK.
Why? Because perhaps even after one files BK, retirement accounts are off limits.
Not that I personally would recommend this… But just saying….If someone is really desperate.
Chances are, they won’t even go to BK court, but will settle with the collector at much less than owed.[/quote]
flu, the vast majority of cc lenders today have cut down nearly EVERY cardholder’s credit limit, whether or not the account is active or the upper-limits were ever used. This is involuntary and was done to the accounts of the “rich” and “poor” alike.
The cc companies have now realized that too much credit was extended to a lot of people during the millenium boom and are trying to avoid having any more big losses resulting from the mistakes they made in the past.
A cc lender typically runs the credit report of all its cardholders periodically, even if they are current on their payments. Someone who has managed to obtain 10 cards with a $10K-each credit limit AFTER acquiring the card who is checking the credit is a BIG RED FLAG. It gives the impression that the cardholder is amassing a “war chest” so they can default and/or is trying to scam each card account they have by borrowing cash from one card to make payments on another, etc.
cc companies are now wise to the scams of yesteryear. Low FICO score applicants are now either rejected outright or have to post their own money with the cc company to get a “secured card” in order to build their credit back up.
The days of one being able to obtain several high-limit cc’s in a short period of time are over, IMHO.
Card companies like AMEX and Visa Signature (which have no upper limit) constantly review the appropriate limit for its cardholders, based upon repayment record and known regular income and assets. If one walks into any retail establishment and tries to buy something with one of these cards which is REALLY expensive (could be over $500 to over $2K, depending on type of card program and cardholder record), the establishment will have to call for approval first and the cc company may text or call the cardholder to ask them if that is actually them wanting to purchase the item/service. This is done to prevent fraud.
I just don’t see how anyone with ten cards still has a $10K+ credit limit on any of them today.
February 12, 2013 at 12:16 PM #759269spdrun
ParticipantOK, even two cards with a $10k limit plus $5k cash of your own would suffice for $100k of investments. Get a margin account, dump $25k cash into it (prerequisite for a pattern day-trader account). You then can get up to 4x margin.
February 12, 2013 at 1:04 PM #759270Participant[quote=bearishgurl][quote=flu]On second thoughts….Not that I would consider this personally…But I guess someone in serious financial doo-doo…
Hypothetical situation. Let’s say some person has no house to HELOC…. No chance of ownership…Let’s say the person has no savings, no IRA….And has a job that doesn’t really depend on having stellar credit.
But the person has 10 credit cards with $10000 credit line each.
Maybe works out for them is to cash out all credit cards on credit line, and put that money into the IRA….10 credit cards $3000 each say $30000 into an IRA, invested wisely…File BK.
Why? Because perhaps even after one files BK, retirement accounts are off limits.
Not that I personally would recommend this… But just saying….If someone is really desperate.
Chances are, they won’t even go to BK court, but will settle with the collector at much less than owed.[/quote]
flu, the vast majority of cc lenders today have cut down nearly EVERY cardholder’s credit limit, whether or not the account is active or the upper-limits were ever used. This is involuntary and was done to the accounts of the “rich” and “poor” alike.
The cc companies have now realized that too much credit was extended to a lot of people during the millenium boom and are trying to avoid having any more big losses resulting from the mistakes they made in the past.
A cc lender typically runs the credit report of all its cardholders periodically, even if they are current on their payments. Someone who has managed to obtain 10 cards with a $10K-each credit limit AFTER acquiring the card who is checking the credit is a BIG RED FLAG. It gives the impression that the cardholder is amassing a “war chest” so they can default and/or is trying to scam each card account they have by borrowing cash from one card to make payments on another, etc.
cc companies are now wise to the scams of yesteryear. Low FICO score applicants are now either rejected outright or have to post their own money with the cc company to get a “secured card” in order to build their credit back up.
The days of one being able to obtain several high-limit cc’s in a short period of time are over, IMHO.
Card companies like AMEX and Visa Signature (which have no upper limit) constantly review the appropriate limit for its cardholders, based upon repayment record and known regular income and assets. If one walks into any retail establishment and tries to buy something with one of these cards which is REALLY expensive (could be over $500 to over $2K, depending on type of card program and cardholder record), the establishment will have to call for approval first and the cc company may text or call the cardholder to ask them if that is actually them wanting to purchase the item/service. This is done to prevent fraud.
I just don’t see how anyone with ten cards still has a $10K+ credit limit on any of them today.[/quote]
BG,
I think that WAS the case but I think things are on an upswing again. Personally, I didn’t have any credit lines reduced. Quite the contrary. They have steadily increased them. And like you said, AMEX and Visa Signature don’t really limit you too much if you have good credit.
One thing I’ve noticed is that companies are getting more aggressive again (like before) in sending out offers. For example, I’ve been an AMEX holder since 1991 and have a few cards with them. I’ve had a Platinum card for many many years which essentially has no limit. Same thing with a Business Platinum with them.
But recently, they started targeting me with more cards with no annual fees and tons of Membership Reward points. Gold card (even though I already have a Platinum card) also with no limit. Got 50,000 points for that one. Then they targeted me with pre-approved Gold business card (even though I already have a Platinum Business card). Another 50,000 points. Again, no annual fee for the first year and NO set limit. Then they sent me a pre-approved offer for personal AMEX SPG card with $40,000 limit and 25,000 SPG points with no annual fee for first year. Now, they just sent me last week an AMEX SPG BUSINESS card pre-approved offer. You guessed it, no annual fee for first year plus 25,000 SPG points and $60,000 credit line.
I’ll just cancel the Gold cards now or before the annual fee kicks in that I got the reward points on. Same with the SPG cards.
On top of that you have to figure that I have several other credit cards all with high credit limits. They can already see that I have all of this unused available credit yet they are offering me much more! AMEX knows every card I have because if you pull your credit report, you can see AMEX checks up on it’s customers every month or every other month which I found interesting.
Also, I own a few companies. LLC’s. When I had to call in to accept the SPG Business card offer they even asked if I had any other companies I wanted to “take advantage of this offer”.
Based on this, I’d have to say AMEX and other banks are really wanting to dole out a LOT of credit to people that have solid FICO scores and low/no debt. In my case, I don’t carry revolving balances. I pay off my balances each month but I always charge everything to get miles or points. (You name it and if I can earn miles/points I’ll do it. Even property taxes, monthly HOA fees, country club dues, medical insurance premiums…. just about everything that can be charged).
The problem I’m foreseeing is that even people with solid jobs, high net worths get sucked into the trap of using this leverage and possibly using it in the stock market or possibly to buy real estate.
Forget about the people with low FICO scores and low/no credit limits. I don’t see the big risk there. What I’m forecasting and seeing the true risk will be the people like me that are getting showered with these offers. It could be a recipe for disaster if people decide to try to leverage some of it. After all, we all know people get sucked into the “keeping up with the Jones” mentality.
What I’m seeing is that banks are severely restricted now by what they can and can’t offer. Many of the products and fees they once could charge or offer to their clients has vanished with various regulations and laws. So there is increasing pressure on them to find ways to make money.
I don’t think they are being crazy and offering credit to people with bad FICO scores, which I think is wise. But what happens with the people that have great FICO scores that are getting showered with all this new credit that decide to leverage it? I guess that’s my concern.
[quote=spdrun]OK, even two cards with a $10k limit plus $5k cash of your own would suffice for $100k of investments. Get a margin account, dump $25k cash into it (prerequisite for a pattern day-trader account). You then can get up to 4x margin.[/quote]
That’s the problem. I do think there are people out there that are starting to do this. With interest rates anemic, I think people now more than ever are chasing risky and volatile investments. Before, it’s one thing like in AN’s example of using these for a guaranteed 6% safe CD. But this is an entirely different environment.
And of course, you have senior citizens and people that are retired that are the last people that should be in some of the riskier and volatile investments but they are “chasing” returns just like many others. They can’t cut it in the 1% interest environment so they are being forced to try to make a higher return in other places.
February 12, 2013 at 1:07 PM #759245Participant[quote=AN]ER, I don’t mean to say you always had the pot. I’m saying you have the pot now, so your thinking is definitely different than those who don’t and resort to these risky behavior to get rich. Do you think they’re any different than those who take their paycheck on pay day to the casino hoping to hit it rich? Sometimes, you have to take a step back and see that there are many different people with many different mindset. I won’t say one way is better than the other because I’m not smart enough to know that. I’ll just let the result speak for itself. Your way obviously worked for you. Congrats. But I don’t like to bastardize those who do things differently.
I know buying 1 year CD is different than buying stocks/forex/etc. But it’s still investment, isn’t? It’s just very safe investment vs more riskier investment. I did the risky stuff when I was 18 and starting out with $1-2k. It didn’t work out, I learned my lesson and move on. Some people need to learn it the hard way and some will never learn. But that’s their prerogative and I won’t say they’ve cross some magical limit.[/quote]
NO, I do NOT think these people are any different than people that take their paycheck to the casino on payday. That’s EXACTLY my point.
Unlike you, I WILL say that one way is better than another. I don’t think it’s a matter of saying I’m smarter than someone else. For me it just comes down to basic common sense of not gambling money that they may not be able to afford to lose. Personally, I don’t think the fundamentals of investing and common sense differ based on your net worth. That’s just me.
I’m not “bastardizing those people that do things differently”. I’m simply stating that it’s exactly as you stated. It’s like going to the casino on payday and gambling your paycheck. Whether you have a big pot or a small pot, I can’t see any way that can be justified.
I find in life the size of your “pot” is all relative. Your big pot can be lost just as fast as someone that has a small “pot” if they make foolish and risky decisions. That’s all I’m saying.
February 12, 2013 at 1:17 PM #759272Participant[quote=spdrun]I’ve done it (Say the $25k minimum in a pattern day trader account, plus ability to acquire properties for ca$h.)[/quote]
spdrun,
Just out of curiosity, are you saying you used a credit card cash advance check and deposited it into your margin account so you have 4 X buying power?
I was just curious. I’m just wondering how widespread this type of thing is.
February 12, 2013 at 1:23 PM #759273ParticipantNope – just rolled some debt into a card cash advance to maximize cash on hand, then paid the same off before the pumpkin turned into a coach-and-four.
But yes, I assume your idea is possible.
February 12, 2013 at 3:27 PM #759279flyer
ParticipantWe’ve all had our financial ups and downs, but what’s interesting about all of the different possible paths to wealth people are pursuing (as mentioned in all of the recent posts) is that (per the stats) we aren’t seeing MORE people with a HIGHER net worth–that number is stagnant, and even declining.
As time goes on, it will be interesting to watch those stats, to see if they move upward or not for younger generations–because, in IMO–that’s the bottom line.
February 12, 2013 at 3:35 PM #759280ParticipantProblem is, to have enough time/money to invest, you have to be lucky in the first place.
February 12, 2013 at 4:30 PM #759282an
Participant[quote=flyer]We’ve all had our financial ups and downs, but what’s interesting about all of the different possible paths to wealth people are pursuing (as mentioned in all of the recent posts) is that (per the stats) we aren’t seeing MORE people with a HIGHER net worth–that number is stagnant, and even declining.
As time goes on, it will be interesting to watch those stats, to see if they move upward or not for younger generations–because, in IMO–that’s the bottom line.[/quote]
I wouldn’t call it stagnant. It declined when compare to the peak of 2006 bubble, but it’s well above 10 years ago: http://taxfoundation.org/article/who-are-americas-millionaires.February 12, 2013 at 4:37 PM #759283ParticipantAdjusted for inflation-fellation courtesy of Bearded Bennie?
February 12, 2013 at 8:13 PM #759293Participant[quote=AN][quote=flyer]We’ve all had our financial ups and downs, but what’s interesting about all of the different possible paths to wealth people are pursuing (as mentioned in all of the recent posts) is that (per the stats) we aren’t seeing MORE people with a HIGHER net worth–that number is stagnant, and even declining.
As time goes on, it will be interesting to watch those stats, to see if they move upward or not for younger generations–because, in IMO–that’s the bottom line.[/quote]
I wouldn’t call it stagnant. It declined when compare to the peak of 2006 bubble, but it’s well above 10 years ago: http://taxfoundation.org/article/who-are-americas-millionaires.%5B/quote%5DInteresting article AN. If there are more millionaires than 10 years ago, that might be relative to the fact that there are also more people in the workforce, so the “net” might be about the same.
The section on “Millionaire Status Fleeting” was my favorite part of the article, and so very true. Many who are millionaires at 40 are not able to sustain that status for the balance of their lives–which is what really matters.
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