hello, we're thinking of taking out a small home equity loan to finance
some landscape work for our house this year. however, i just received
a few checks from discover that claims to offer free interest til apr
05. they would continue the free interest offer after apr 05 so long
as you charge at least $50/mo on the credit card. there is a 3% (up to
max $50) up front charge but that seems nominal if you plan to borrow
several thousand. anyone using this offer or had any thoughts on the
matter?

thanks

In article .com,
wrote:
hello, we're thinking of taking out a small home equity loan to finance
some landscape work for our house this year. however, i just received
a few checks from discover that claims to offer free interest til apr
05. they would continue the free interest offer after apr 05 so long
as you charge at least $50/mo on the credit card.

The main catch here is that payments are applied to the balances at the
lowest interest rate first. Thus an increasingly larger percentage of the
remaining balance will be at your standard interest rate every month.

Assuming you don't use the card at all except for your required $50/mo, and
assuming a standard interest rate of 16% (just a guess) by this time next
year you'll have a $500 balance at the regular rate and will have paid $37
in interest. By 1/2007 that will be a $1100 balance and $169 in total
interest; by 1/2009 $2300 and $721 total interest.

The more you borrow, and the quicker you pay it off the better the deal.
You'd have to run the numbers based on your specific plans to see whether
it really makes sense. Note that the home equity loan's interest will
probably be tax-deductible so its true cost is probably ~80-90% of the
actual dollar amount.

The deal quickly starts getting worse if you use the account for more than
the required $50/mo. To get anything out of 0% offers you cannot use the
account for *anything* else.

Another catch is that a single late payment, to Discover or anyone else on
your credit report, may be enough to jack the 0% up to the standard rate,
or even higher.

As such things go, this isn't a very good offer. If your credit is good
you should be able to get 12 months at 0% with no transaction fee on a
separate account with no purchase requirements. Discover may be willing to
sweeten their offer this much, but if not one of their competitors will.
--
Jim Prescott - Computing and Networking Group
School of Engineering and Applied Sciences, University of Rochester, NY

On 5 Jan 2005 19:13:08 -0500, (Jim
Prescott) wrote:

In article .com,
wrote:
hello, we're thinking of taking out a small home equity loan to finance
some landscape work for our house this year. however, i just received
a few checks from discover that claims to offer free interest til apr
05. they would continue the free interest offer after apr 05 so long
as you charge at least $50/mo on the credit card.

The main catch here is that payments are applied to the balances at the
lowest interest rate first. Thus an increasingly larger percentage of the
remaining balance will be at your standard interest rate every month.

Your logic escapes me. If the OP takes out the Discover card to pay
for this landscaping work at 0% interest and starting in April 05
continues to make not only the minimum payments on the original charge
but also charges the minimum $50 in new charges every month, what
interest is the OP paying if s/he is following the rules to maintain
the 0% interest? There is no interest involved, only the project
loan's minimum balance plus the $50+ in new charges every month.

Your other points are well taken, but don't address the essential
point, which is that the OP theoretically can maintain a running loan
with Discover at 0% interest.

i wonder if it's only the initial charge that is interest free and ALL
payments towards discover go to that initial charge until it's paid off
(thus the $50/mo sustanance fee starts to accumulate with interest
until the entire initial balance is paid off)

KLS wrote:
Your other points are well taken, but don't address the essential
point, which is that the OP theoretically can maintain a running loan
with Discover at 0% interest.

Only on the original amount. But on the mounting balance created by the $50
charges the person will be racking up $$ with whatever the interest rate is
since any money put on the card will only take off from the 0% balance first.

In article ,
KLS wrote:
On 5 Jan 2005 19:13:08 -0500, (Jim Prescott) wrote:
The main catch here is that payments are applied to the balances at the
lowest interest rate first. Thus an increasingly larger percentage of the
remaining balance will be at your standard interest rate every month.
Your other points are well taken, but don't address the essential
point, which is that the OP theoretically can maintain a running loan
with Discover at 0% interest.

A simplified example. Initial balance $0, $5000 0% check, $50/mo
starts right away, 18% non-promo rate, 1/45th min payment.

First month's balance is $5050 ($5000 @0% + $50 @18%), no interest
since prev balance was $0. Min payment is $112. After they receive
the payment your balance will be $4938 ($4888 @0% + $50 @18%).

Next month the balance is $4938 + $50 newchgs + $.75 interest = 4988.75.
Min payment is $110. After applying the $110 the new balance is
$4878.75 ($4778.75 @0% + 100 @18%).

Next month the balance is 4878.75 + 50 newchgs + 1.50 interest = 4930.25.
Min payment is $109. After pmt bal is $4821.25 ($4671.25 @0% + 150 @18%).

And so on, the $50/mo along with any other purchases made, just keep
adding to the balance you are paying 18% on. Payments don't get applied
to the 18% balance until the 0% balance is completely paid off.

0% with no transaction fees can be a good deal but only if it is a
separate line of credit that you use for nothing else. The OP's offer
was at least upfront about saying purchases would be required. Often
they try to trick you into purchases by offering what would otherwise
be a very good deal on items or services, but that have to be charged
to this specific card (eg "$20 off any purchase made with your Sears
card ending in 1234"). Even purchases that are later returned will end
up costing you interest month after month (eg "only $79.95 and you can
cancel within 60 days for a complete refund").
--
Jim Prescott - Computing and Networking Group
School of Engineering and Applied Sciences, University of Rochester, NY

On 11 Jan 2005 16:24:38 -0500, (Jim
Prescott) wrote:

A simplified example. Initial balance $0, $5000 0% check, $50/mo
starts right away, 18% non-promo rate, 1/45th min payment.

First month's balance is $5050 ($5000 @0% + $50 @18%), no interest
since prev balance was $0. Min payment is $112. After they receive
the payment your balance will be $4938 ($4888 @0% + $50 @18%).

Next month the balance is $4938 + $50 newchgs + $.75 interest = 4988.75.
Min payment is $110. After applying the $110 the new balance is
$4878.75 ($4778.75 @0% + 100 @18%).

Next month the balance is 4878.75 + 50 newchgs + 1.50 interest = 4930.25.
Min payment is $109. After pmt bal is $4821.25 ($4671.25 @0% + 150 @18%).

And so on, the $50/mo along with any other purchases made, just keep
adding to the balance you are paying 18% on. Payments don't get applied
to the 18% balance until the 0% balance is completely paid off.

0% with no transaction fees can be a good deal but only if it is a
separate line of credit that you use for nothing else. The OP's offer
was at least upfront about saying purchases would be required. Often
they try to trick you into purchases by offering what would otherwise
be a very good deal on items or services, but that have to be charged
to this specific card (eg "$20 off any purchase made with your Sears
card ending in 1234"). Even purchases that are later returned will end
up costing you interest month after month (eg "only $79.95 and you can
cancel within 60 days for a complete refund").

You are absolutely right here. On the other hand, Discover offers a
deal where if you take out a card with them, you can transfer a
balance for 0% interest until some specified time and maintain that 0%
on not only the original balance but also on subsequent charges if you
begin charging on the account before the grace period expires. If no
new charges are incurred, the interest on the original balance jumps
to whatever the going rate is. The same is true if one is late in
paying the minimum balance; whammo, you're in the higher interest
range. I think I had that in mind when I responded to the OP's
Discover check situation, which might be different.

Funny you should be from Rochester; I am, too.

In article ,
KLS wrote:
You are absolutely right here. On the other hand, Discover offers a
deal where if you take out a card with them, you can transfer a
balance for 0% interest until some specified time and maintain that 0%
on not only the original balance but also on subsequent charges if you
begin charging on the account before the grace period expires. If no
new charges are incurred, the interest on the original balance jumps
to whatever the going rate is.

There are a variety of offers. I believe the credit card companies can
get names and addresses from the credit bureaus based on credit score
and/or some of the specific metrics that are easy to glean from a credit
report. They can then target specific offers to people with various types
of credit. The better your credit the better the deals you get.

The best offers I've seen are 0% on purchases and balance transfers (with
no transaction fees) for 12 months (maybe just 9). No requirement to make
purchases, but at 0% why wouldn't you? The only catch is to make sure you
make the minimum payments and remember when the offer expires.

I think I've even seen terms like this for a reward card but I'd have to
double check.

My credit score is good but not stratospheric; I assume there are even
better offers out there.
--
Jim Prescott - Computing and Networking Group
School of Engineering and Applied Sciences, University of Rochester, NY