Take Control of Your Finances Part 2 [Simple Strategy with Big Benefits]

A 0% Credit Card Strategy that is the foundation of positioning to take advantage of and make your own opportunities

Disclaimer – I am not a financial planner or any type of certified or trained financial whatever you want to call it.  This is from personal experience over many years of strategizing and working on my personal financial planning.

What is it?

Essentially it is using 0% credit card balance transfer promotions to the fullest advantage.

How it works

Basics needed to build credit:

To build credit, you need to have debt:   Seems very counterintuitive but that is just how the system was designed.  Therefore, to maintain and increase credit worthiness, one must have debt, show a good payment history, and have a good debt-to-credit ratio (debt to credit ratio ie: 10K revolving credit card line with a debt balance on that total of 4K making a total debt to credit of 40% with 60% still available).

Finding the promotionals and getting them is easier than you think

A vast amount of credit cards offer promotional 0% interest balance transfers to get you to sign up with them or use your available credit.  This 0% last for sometimes 10 months to even 21 months.

Free credit score companies such as creditkarma.com will often help pair you with credit card companies making these promotional offers and will rate your potential acceptance of each. Sign up for the free account and you’ll get a bunch of ads pushed towards you.  It is also as simple as just “Googleing” credit card 0% balance transfer.

Opening accounts

If you are going to open multiple accounts, do it all in the same day and strategize how you plan to breakdown the transfers.  If you do multiple applications over a period of days, it will hit your credit score harder and you’ll have less of a chance for approval.  Do it all in one shot and you alleviate that from happening.  Stay away from cards with annual fees.  Don’t apply for multiple cards from same company.

Even if you can only open a $500 card, it’s a start and time will go quicker than you think and that $500 of debt you transferred, you will be paying significantly less on than compared to an interest bearing account.

Transfer costs

Each transfer on a standard costs you 3% to sometime 5% of the transfer total.  This is a one-time fee.  The standard also for payment totals is usually 1% to 2% of the balance total (ie: 15K balance will run you $150-$300/mo payment for the promotional period).  This is to attempt to ensure that you will have a larger balance at the end of the promotional rate that they can collect interest on.

Make your payments automatic.  If you miss a payment you could open yourself to losing the promotional rate and getting hit with the high credit card interest rates.

Example of strategy used to reduce monthly payments, build credit worthiness, increase debt to credit ratio, keep revolving credit, maintain balance debt ratio and continued payments: all done to dramatically increase credit score.

• 5k on a card with 3% fee: 5150 total and 51.50/mo payments
• Loan payment for 2yr loan at 4% interest- 12/mo (saving 165.62/mo)
• Loan payment for 3yr loan at 4% interest- 147.62/mo (saving 96.12/mo)
• Loan payment for 5yr loan at 4% interest-92.08/mo (saving $40.58/mo)
• a promotional for 12 months, paying only the minimum balance you will pay $618 on the balance: new balance is 4,532
• open a new account and do another transfer- this will increase your debt to credit ratio by 50%
• with transfer fee new balance is 4,668 ($136 is transfer fee: total for 2 transfers is $286 in fees and 0% interest
• new payment at 46.68/mo and after 12 months a balance of $4,108 left
• At end of promotional, open a new account and do another 0% transfer
• This will increase your debt to credit ratio again by around 30%
• If you just had a loan and paid that off, the credit total for the loan goes away and you no longer would have a debt to credit ratio. With the 0% transfer strategy, credit remains because it is revolving, even if you paid off the debt.

So after three 12 month cycles, you will have:

• Around $11,300 of available revolving credit
• $3,615 left in debt with a monthly payment around $36.15
• A debt to credit ratio of 32%
• Three years good payment history
• A total savings (compared to a 3 year loan) of $3,460.32
• If that savings was invested at a 10% rate of return you would have a total $4,117.80 in your pocket
• And a sky rocketing credit score.

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Once you have multiple cards and had them with good standing or some time, they will start offering the 0% again to get you to transfer back to them.  Take advantage when your other promotionals are expiring and it is time to rotate.  A lot of times, the card companies will send you checks with these same promotionals as well.  You can write these checks for cash and take advantage, use it for purchases, balance transfers, etc.  I will explain more later on strategies for purchases using the checks.

Also, if you have paid down the debt so much, you may just need to get more so your credit score isn’t affected.  Remember you need some debt to build credit.  You can use the checks to write out for cash to yourself and invest that cash.  Remember the transfer fee is only 3%-5% and the payment is 1%-2% of the balance.  Essentially, for it to be free money, you would just need just over 2% return on your investment per month.   However, I do no advise this unless you have some guarantees on your return.

Make sure you only open as many accounts as you really need to keep the debt to credit ratio around 20-30% tops.  I would suggest to try and keep it over 5% or so.

Example of strategy with 2yr payoff compared to a 2yr loan:

• Transfer of 5k costs $150 in transfer fee for a total of $5,150 w/monthly payment of $51.50
• After second promotional for 12 months with $46.68/mo payments, remaining balance is $4,532
• Total for 2 transfers is $286 in fees and 0% interest

This gives you:

• 2 years good payment history
• Dramatically reduced debt to credit ratio from 100% to 41%
• Increase available credit from 0 to $5,900 with $10,000 total revolving
• Reduced first year monthly payment total (compare to loan) $165.62 per month keeping that in your pocket (total $1987.44/year)
• Second year saved $170.44 per month (total $2,045.28/year)
• Totaling $4,032.72 for two years
• Invested at 6% rate of return leaves you with $4,451.04
• If you used the invested cash to pay off remaining balance, you will have $343.04 left in your pocket and will have paid out $1461($5,567 in total) fees and monthly payments.

That is:

• $343 in your pocket
• 0 debt
• 100% available revolving credit ratio ($10,000 available credit)
• 2 years payment history
• Used the exact same amount per month as you would’ve with the loan
• Credit score will be jumping up (just will need to get more debt)

With a 5K loan for two years at 4% interest with a payment of $217.12/mo.  You would have:

• Paid a total of $5210.99 in interest and payments
• $0 in your pocket
• Nothing in available revolving credit (credit score will take a hit)
• 2 years good payment history
• No debt to credit ratio (credit score will take a hit)
• Once loan is paid of no debt for credit score (score will go down)

Making large purchases with credit cards and not loans:

Plan this out!

Get a card that offers a decent cashback (Discover is really good).  For example a 2% cashback bonus on qualifying purchases.  Note: This card will not be the one you use for a 0% but rather used to take advantage of the 2% cashback.

Now say you want to buy a car for 10K.

Use the cashback card (as long as the dealership will allow you- some might not because of merchant account fees charged to them).

Buy the car on the credit card for 10K.

Then, let almost one month go by.  You do this so you don’t use your personal cash to make any payment yet, your cash gets to stay in its investment and continue to make you money, and you don’t get charged interest.

Nearing the end of the month, you use a promotional 0% card and transfer the balance to pay off the 10K.

So now, you bought a car for 10K and got 2% back, $200, which you can then use to make the first and/or both first and second credit card payments on the 0%, which would be months 2 and 3. 

So this means that you bought a car and did not use your own money to make a single payment until  4 months after the purchase and the payment will only be 1%-2% of the balance total, NO interest, ALL to Principal.

Stay Safe and God Bless!
Semper Fi

Camaron Hillman; Pres / CEO Devil Dog Concepts 

Devil Dog Concepts
www.devildogconcepts.com