Should I get cash from credit card at 0% for 8 months and put it on loans?
"There are two issues here: arithmetic and psychology. Scenario 1: You are presently paying an extra $500 per month on your student loan, above the minimum payments. Your credit card company offers a $4000 cash advance at 0% for 8 months. So you take the cash advance, pay it toward the student loan, and then instead of paying the extra $500 per month toward the student loan you use that $500 for 8 months to repay the cash advance. Net result: You pay 0% interest on the loan, and save roughly 8 months times $4000 times the interest on the student loan divided by two. (I say ""divided by two"" because it's not the difference between $4000 and zero, but between $4000 and the $500 you would have been paying off each month.) Clearly you are better off. If you are NOT presently paying an extra $500 on the student loan -- or even if you are but it is a struggle to come up with the money -- then the question becomes, can you reasonably expect to be able to pay off the credit card before the grace period runs out? Interest rates on credit cards are normally much higher than interest rates on student loans. If you get the cash advance and then can't repay it, after 8 months you are paying a very steep interest rate, and anything you saved on the student loan will quickly be lost. What I mean by ""psychological"" is that you have to have the discipline to really repay the credit card within the grace period. If you're not very confidant that you can do that, this plan could go bad very quickly. Personally, I've thought about doing things like this many times -- cash advances against credit cards, home equity loans, etc, all give low-interest money that could be used to pay off a higher-interest debt. But it's easy to get into trouble doing things like this. It's easy to say to yourself, Well, I don't need to put ALL the money toward that other debt, I could keep a thousand or so to buy that big screen TV I really need. Or to fail to pay back the low-interest loan on schedule because other things keep coming up that you spend your money on instead, whether frivolous luxuries or true emergencies. And there's always the possibility that something will happen to mess up your finances, from a big car repair bill to losing your job. You don't want to paint yourself into a corner. Finally, maxing out your credit cards hurts your credit rating. The formulas are secret, but I understand that if you use more than half your available credit, that's a minus. How much it hurts you depends on lots of factors." Do you know how many people end up with an 18-21% rate on their credit card?  They started off with low teaser rates.  There was an article about it recently on Yahoo.  Mainly this comes from a lack of discipline, or an unforeseen emergency.  However, lets assume, that you are a bit uncommon and have iron discipline. It comes down to a math question.  What is the rate on your student loan?  I am going to assume 6%, and lets say that you are now paying interest.  So there is 7 months between now an then, you would pay $140 (4000 * .06/12 * 7) in interest if you left it on the student loan. Typically there is not really a free lunch with the zero percent interest rate CC.  They often charge a 3% balance transfer fee, so you would pay that on the entire amount, about $120.   Is it worth the $20?  I would say not.   However, those simple calculations are not really correct.  Since you would have to pay the CC $588.6/month to take care of this, you have to shrink the balance on the student loan to do a true apples to apples comparison.   So doing a little loan amortization, you can retire $4000 on the student loan only paying $583/month, and paying a total of $80.40 in interest. So it would cost you money to do what you are suggesting if there is a 3% transfer fee.   Even if there is no transfer fee, you only save about $80 in interest.   If it was me, I would direct my energy in other areas, like trying to bring in more money to make this student loan go away ASAP. Oh and GO STEELERS! "If there is any fee at all on the cash advance, and zero interest on the student loans (for now), it's not worth it mathematically.  And for only 8 months of ""free"" money, it's rare for it to be worth it overall. You need to save a significant amount either by having a good net interest rate (e.g., saving 20% on another card and not paying any interest on the new loan) or by saving a lot on principal (e.g., paying off $100k now and not paying the interest on that for the next 8 months). I wouldn't worry about it hurting your credit score unless your credit is going to be evaluated during the time you're maxing your card. Part of your score (20-30% IIRC) is your credit utilization ratio, which is how much you have available vs. how much you're using. It's separate from the part that accounts for history, so it's only relevant at the time you're looked up." On the face, this appears a sound method to manage long run cumulative interest, but there are some caveats. Maxing out credit cards will destroy your credit rating.  You will receive no more reasonable offers for credit, only shady ones.  Though your credit rating will rise the moment you bring the balance back down to 10%, even with high income, it's easy to overshoot the 8 months, and then a high interest rate kicks in because of the low credit rating. Further, maxing out credit cards will encourage credit card lenders to begin cutting limits and at worse demand early payment. Now, after month 6 hits, your financial payment obligations skyrocket.  A sudden jolt is never easy to manage.  This will increase risk of missing a payment, a disaster for such hair line financing. In short, the probability of decimating your financial structure is high for very little benefit. If you are confident that you can pay off $4,000 in 8 months then simply apply those payments to the student loan directly, cutting out the middle man.  Your creditors will be pleased to see your total liabilities fall at a high rate while your utilization remains small, encouraging them to offer you more credit and lower rates. The ideal credit card utilization rate is 10%, so it would be wise to use that portion to repay the student loans. Building up credit will allow you to use the credit as an auxiliary cushion when financial disaster strikes.  Keeping an excellent credit rating will allow you to finance the largest home possible for your money.  Every percentage point of mortgage interest can mean the difference between a million USD home and a $750,000 one.
But.. what I really want to know.... is it illegal, particularly the   clause REQUIRING a trade in to qualify for the advertised price? The price is always net of all the parts of the deal. As an example they gave the price if you have $4000 trade in. If you have no trade in, or a trade in worth less than 4K, your final price for the new car will be more. Of course how do you know that the trade in value they are giving you is fair. It could be worth 6K but they are only giving you a credit of 4K. If you are going to trade in a vehicle while buying another vehicle the trade in should be a separate transaction. I always get a price quote for selling the old car before visiting the new car dealer. I do that to have a price point that I can judge while the pressure is on at the dealership.. Buying a car is a complex deal. The price, interest rate, length of loan, and the value of the trade in are all moving parts. It is even more complex if a lease is involved. They want to adjust the parts to be the highest profit that you are willing to agree to, while you think that you are getting a good deal. This is the fine print: All advertised amounts include all Hyundai incentives/rebates, dealer   discounts and $2500 additional down from your trade in value. +0% APR   for 72 months on select models subject to credit approval through HMF.   *No payments or 90 days subject to credit approval. Value will be added to end of loan balance. 15MY Sonata - Price excludes tax, title,   license, doc, and dealer fees. MSRP $22085- $2036 Dealer Discount -   $500 HMA Lease Cash - $500 HMA Value Owner Coupon - $1000 HMA Retail   Bonus Cash - $500 HMA Military Rebate - $500 HMA Competitive Owner   Coupon - $400 HMA College Grad Rebate - $500 HMA Boost Program - $4000   Trade Allowance = Net Price $12149. On approved credit. Certain   qualifications apply to each rebate. See dealer for details. Payment   is 36 month lease with $0 due at signing. No security deposit   required. All payment and prices include HMA College Grad Rebate, HMA   Military Rebate, HMA Competitive Owner Coupon and HMA Valued Owner   Coupon. Must be active military or spouse of same to qualify for HMA   Military Rebate. Must graduate college in the next 6 months or within   the last 2 years to qualify for HMA College Grad rebate. Must own   currently registered Hyundai to qualify for HMA Valued Owner Coupon.   Must own qualifying competitive vehicle to qualify for HMA Competitive   Owner Coupon. "Thirty thousand in credit card debt is a ""big elephant to eat"" so to speak.  But you do it by taking a bite at a time.  One positive is that you do not want to borrow from your 401K.  Doing so is a horrible idea. The first question you have to ask yourself and understand, is how you accumulated 30K in credit card debt in the first place?  Most people get there by running up a relatively small amount, say 5K, and playing the zero transfer game a few times.  Then add in a late payment, and a negative event or two (like the car breaking down or a trip to the emergency room) and poof a large amount of credit card debt.   Obviously, I have no idea if this is how you got there, and providing some insight might help.   Also, your age, approximate income, and other debts might also help provide more insight.  I assume you are still working and under age 59.5 as you are talking about borrowing from your 401K. Where I come from is that my wife (then girlfriend) found ourselves under stifling debt a few years ago.  When we married, we became very intentional and focused on ridding ourselves of debt and now sit completely debt free (including the house).  During our debt payoff time, we lived off of less than 25% of our salary.  We both took extra jobs when we were able.  Intensity was our key.     If I were you, I would not refi the house.  There are costs associated with this and why would you put more debt on your home? I might cash out the annuity provided that there are no negative tax consequences and depending on how much you can get for it.  Numbers are the key here.  However, I feel like doing so will not retire this debt. The first thing you need to do is get on a written budget.  A game plan for spending and stick to it.  If you are married, your spouse has to be part of this process.  The budget has to be fresh each month, and each month you and your wife should meet.  To deviate from the budget, you will also need to have a meeting.  My wife and I still do this despite being debt free and enjoying very healthy incomes. Secondly, it is about cutting expenses.  Cable: off.  No eating out or vacations.  Cut back on cell phone plans, only basic clothing.  Gift giving is of the $5 variety and only for those very close to you.  Forget lattes, etc.  Depending on your income I would cut 401K contributions to zero or only up to the company match (if your household income is above 150K/year). Third, it is about earning more.  Ebay, deliver pizzas, cut grass, overtime, whatever.   All extra dollars go to credit card balance reduction.  At a minimum, you should find an extra $1000/month; however, I would shoot for 2K.  If you can find 2K, you will be done with this in 13 months.  I know the math doesn't work out for that, but once you get momentum, you find more. How good will it feel to be out from under this oppression next March?  I know you can do this without cashing in the annuity or refinancing.  Do you believe it?" If the checking account is in a FDIC insured bank or a NCUA insured Credit Union then you don't have to worry about what happens if the bank goes out of business. In the past the government has made sure that any disruption was minimal. The fraud issue can cause a bigger problem. If they get a hold of your debit card, they can drain your account. Yes the bank gives you fraud protection so that the most you can lose is $50 or $500; many even make your liability $0 if you report it in a timely manor. But there generally is a delay in getting the money put back in your account. One way to minimize the problem is to open a savings account,it also has the FDIC and NCUA coverage . The account may even earn a little interest. If you don't allow the bank to automatically provide an overdraft transfer from savings to checking account, then the most they can temporarily steal is your checking account balance. Getting a credit card can provide additional protection. It also limits your total losses if there is fraud. The bill is only paid once a month so if they steal the card or the number, they won't be able to drain the money in the bank account.  The credit card, if used wisely can also start to build a positive credit file so that in a few years you can get a loan for a car or a place to live. Of course if they steal your entire wallet with both the credit and the debit card... So my advice for your financial situation depends on your aims. Are you aiming to: -   Completely clear your debt -   Clear one card to free up more monthly income.  -   Clear some debt to allow further controlled spending -   Clear one card and focus on just using one, having 2nd as emergency. There are other things you may wish to do but you said to pay off some / all of 2 credit card bills. If you want to contact me I can plan this more precisely. Some seem the same but other factors can come into play as well. Differing rates of interest make the options clearer. My first advice would be to call the card companies and see if you can get better rates first. SCENARIO (some figures made up for visual) Credit Card Debts    8,000       8,000 Monthly payment       100           100 APR %                              10             10 Ignoring APR this will be 80 months to repay (otherwise 140 months using my example amounts above) £28,000 repaid over 11 years 8 months.  Your Suggestion As per your suggestion originally, paying off cards equally will allow smaller debt on both cards. Credit Card Debt      3,000      3,000 Monthly payment       100          100 APR %                              10            10 With a 0% APR this would be paid off in 2 years 6 months. Cards are available to get free balance transfers, need to look into this. With the 10% APR this would take 3 years 1 month. £10,000 lump and £7,400 repaid over 3 years 1 month (saving £10,600 and 8 years 7 months) AIM: To clear debt completely. My advice here is to use the £10,000 lump sum to pay off one credit card, the remaining £2,000 can then come off the other card. This will free up your outgoings (was 2 x £100) by £100. But then use this £100 to pay off the card, this will result in the following: Credit Card Debt      6,000 Monthly payment       200 APR %                              10 With a 0% APR this would be paid off in 2 years 6 months. Cards are available to get free balance transfers, need to look into this. With 10% APR this would take roughly 3 years 1 month. £10,000 lump and £7,400 repaid over 3 years 1 month (saving £10,600 and 8 years 7 months).   This option is the same as above, but you have the options on the odd tight month to reduce payments to £100.   This also will allow the 2nd card to be used interest free for an emergency purchase (to be paid off without any interest charge)   If rates are different, pay of the one with the higher APR AIM: Clear one card to free up more monthly income.  AIM: Clear one card and focus on just using one, having 2nd as emergency. Same as above, but don’t increase to £200, leave monthly payment at £100. Credit Card Debt      6,000 Monthly payment       100 APR %                              10 With a 0% APR this would be paid off in 5 years. With the 10% APR this would take 88 months (7 years 4 months) £10,000 lump and £8,800 repaid over 7 years and 4 months (saving £9,200 and 4 years 4 months).   This also allows for some extra spending (even racking back up the debt – although not advised) AIM: Clear some debt to allow further controlled spending As above apart from this will allow you to spend to get back up to full £16,000 debt. NOTE My figures are theoretical, paying off £500 (£250x2) a month instead of the £100 (10%APR) would take: Lump sum 10,000, remaining 6,000 – 14 months (£17,000 paid) Lump sum 5,000, remaining 2 x 5,500 – 26 months (£18,000 paid) Lump Sum 0, remaining 2 x 8,000 – 40 months (£20,000 paid) Now I have finished waffling, I hope you have an idea on what you are aiming to achieve and a better idea of what to do when you receive the income  Stephen. "Just to argue the other side, 1.49% is pretty low for a loan. Let's say you have the $15k cash but decide to get the car loan at 1.49%. Then you take the rest of the money and invest it in something that pays a ~4% dividend (a utility stock, etc.). You're making money on the difference. Of course, there's no guarantee that the underlying stock won't drop in value, but it might go up, too. And you'll likely pay income tax on the dividends. Still, you have a good chance of making money by taking the loan. So I will argue that there are scenarios where taking advantage of a low interest rate loan can be ""good"" as an investment opportunity when the risk/reward is acceptable. Be careful, though. There's nothing wrong with paying cash for a car!" "0% furniture loans can hurt your credit rating. I was told by a bank mortgage officer (sorry I can't cite a document) that credit rating algorithms consider ""consumer"" loans like 0% appliance loans and certain store-specific credit cards as a negative factor, lowering your overall score. The rationalization given was that that taking that type of credit is an indicator that you have zero cash reserves. The actual algorithms are proprietary, so I don't know how you could verify this. If true, it runs counter to the conventional wisdom that getting credit and then paying it off builds your credit score." I'd pay cash.  Car loans are amortized, so sometimes you can get upside-down on the loan between 18-30 months because you are pre-paying interest. This can get you into trouble if you get into an accident. Given the low rate and the type of car you're buying, you're probably fine either way. As a general rule of thumb, and assuming you have a choice, my advice is to pay cash for things things that depreciate, expenses, and consumables. Consider credit (even if you have cash) for things that will appreciate in value or generate cash flow. That is, use credit as leverage.