# Credit card offer of 0% - Should I take them up on this??



## R.O.V. (May 16, 2010)

I just recieved a credit card offer from MBNA that offers an introductory rate of 0% for 15 months. I was wondering if it would be a good idea to apply for the card and use the money transfer som of my LOC debt on which I pay Prime + 1.5%. Or is this some kind of trap that will inevitably make money from you in other ways.

In the other fees section it states there is a 1% fee for transfers, cash advances etc. No annual fees.

Any advice appreciated.


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## osc (Oct 17, 2009)

That's deceiving. You are paying 1% for that, so the rate is not really 0%. This offer is meant to hook you up into a very high interest rate after 15 months. I would not take it.
If you take it, you need to be sure that at the end of the 15 months you will be able to transfer the balance back to LOC (or better to pay it off).


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## Jungle (Feb 17, 2010)

I am on my second 0% credit card offer. They have been circling around RFD for a few years. I love this offer! osc is correct, it's not really 0% because you pay a one time, up front, 1% transfer fee. So for $10G borrowed, you pay $100, one time. That's it. Where else can you borrow money this cheap?

On my first card, I invested the money, took the gains then paid it back in full, a few days before the 15 months was up. 

My second card is being used to save interest costs on a debt when we bought our new car. 

The key to this card is:
1. Paying the full amount back within 15 months 
2. Making the minimum payment every month of 1%. 
3. DO NOT go over you limit when transferring (include 1% transfer fee)

If you do not do the three things above, your interest rate will default to a very high interest rate and I believe they even back track on the interest, using the higher rate. 

Some other things to note:

Your 15 months starts when they get your application. NOT when you receive the card. The card usually takes about 2-4 weeks to get. So you lose some time there. 

Ideally you would want to max out the card (don't go over limit), but this _could _effect your credit score negatively, if your "overall" (all credit accounts) debt to available credit ratio is over 75%. 30% of your FICO score is calculated from this. 

It's not harmful if you have lots of other available credit accounts. 

To answer your question, only use it for your LOC if:
1. You can service the minimum payment; and,
2. You can pay the full balance off before 15 months. 

Hope that helps


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## Brian123 (Sep 4, 2010)

I am considering this option as well. At the end of my 15 months, can I pay off the balance, make another transfer to the card and start over with another 15 months. Or would I have to apply for a new card? Does anyone know the details on this?


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## Jungle (Feb 17, 2010)

Hey Brian123

Yes you could just pay the balance out at the end of 15 months. To get another offer, you have to re-apply again. Problem is, nobody knows if MBNA will keep doing this offer 15 months from now. 

A few years ago, Citi financial had this offer. But they stopped it now. 

The best way to use these cards is just to save interest costs on existing debt or invest in something guaranteed. . Don't get trapped into new debt and set up a plan to pay this one off!


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## Underworld (Aug 26, 2009)

I did this once back in the Uk - there seemed to be a lot of 0% cards going round.

My only concern is of tarnishing your credit rating by opening and closing a credit card. Any opinion on this?


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## Jungle (Feb 17, 2010)

Underworld said:


> I did this once back in the Uk - there seemed to be a lot of 0% cards going round.
> 
> My only concern is of tarnishing your credit rating by opening and closing a credit card. Any opinion on this?


You will get a hard hit on your credit rating when you first apply. Not a big deal. If you have a responsible credit score one small hit will be minor and will come back. 

As for holding debt, as long as you have other available credit, (ie LOC, CC) that's not maxed out, you will be fine. 

When it's done, MBNA does not close the credit card. Just pay it off in 15 months. After that, you can do one of two things and it doesn't affect the score:

1. Leave it in your drawer to collect dust, as closing credit accounts lowers your score. Just don't use it. 

2. MBNA will allow you to split the available credit into new, MBNA credit cards (except 0% offer), WITHOUT a hard hit on your credit rating. 

I used my old 0% CC credit and split it into a Shopper's Optimum, Smart Cash and Sony Mastercard. I still have the old 0% gold card, it sits in my safe.


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## Brian123 (Sep 4, 2010)

Depending on how much credit I was approved for, lets supose 10,000. I could max it out, save me about $45/month on interest cost to put towards my other debt, which would again create another small saving on interest. Over 15 months, saving about $700.00. I think this would be worth a temporary hit on my credit score.


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## Jungle (Feb 17, 2010)

Brian123 said:


> Depending on how much credit I was approved for, lets supose 10,000. I could max it out, save me about $45/month on interest cost to put towards my other debt, which would again create another small saving on interest. Over 15 months, saving about $700.00. I think this would be worth a temporary hit on my credit score.


Yes absolutely. That's a smart way of thinking and now saving money. Just don't start any new debt


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## Seth (Aug 16, 2010)

Brian123 said:


> Depending on how much credit I was approved for, lets supose 10,000. I could max it out, save me about $45/month on interest cost to put towards my other debt, which would again create another small saving on interest. Over 15 months, saving about $700.00. I think this would be worth a temporary hit on my credit score.


Just ran the numbers on my personal LOC... 10k balance at 7%

700 per year in interest / 12 months = 58.00 per month in interest...

I think it works out the same so I'm eager to hear the answer to his post

*EDIT - you answered before I even hit post... you're quick! 

Thanks*


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## Jungle (Feb 17, 2010)

Just keep in mind what you mentioned in the other thread. You mentioned you and your wife might be looking at upsizing to a bigger house. Banks do not like hanging credit card debt and wads of available credit, when applying for a new mortgage. If the bank tells you to consolidate the credit card debt into the new mortgage, that will defeat the whole purpose. Just throwing that out there, be sure you know what your doing in the next 15 months.


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## R.O.V. (May 16, 2010)

Jungle said:


> You will get a hard hit on your credit rating when you first apply. Not a big deal. If you have a responsible credit score one small hit will be minor and will come back.
> 
> As for holding debt, as long as you have other available credit, (ie LOC, CC) that's not maxed out, you will be fine.
> 
> ...


Thanks for the responses....I'm not sure if I'll apply or not. The interest savings will be relatively minor considering the possible hassles that may be incurred. 

I notice that you guys talk about your credit score...Is this something I should be thinking about even though I am in the process of reducing my LOC debt to zero in a few more months. It has a 50K limit and I have never defaulted on any loan or overly late on a pymt (other than a utility bill/phone than is inadvertantly missed and paid in full on the next billing cycle).

Thanks,
ROV


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## Jungle (Feb 17, 2010)

R.O.V. said:


> Thanks for the responses....I'm not sure if I'll apply or not. The interest savings will be relatively minor considering the possible hassles that may be incurred.
> 
> I notice that you guys talk about your credit score...Is this something I should be thinking about even though I am in the process of reducing my LOC debt to zero in a few more months. It has a 50K limit and I have never defaulted on any loan or overly late on a pymt (other than a utility bill/phone than is inadvertantly missed and paid in full on the next billing cycle).
> 
> ...


YOu don't need to do anything about your score. Since you have never defaulted on a payment your score will be fine.


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## dilbert789 (Apr 20, 2010)

I'm about 8mths in on a 15mth 0% offer from MBNA. They gave me 10k, so I transferred over money from a 7% LOC onto it. One giant gotcha to watch for that I got stung with was that they're billing cycle is like 28days, So if you setup an automated bill payment from your bank to pay say $100 a month, eventually it'll screw you because the bill date becomes earlier and earlier every month. I ended up getting a like $360 interest charge and they dropped my 0% rate. After calling and asking nicely, they reinstated the 0% and dropped the interest charge to $100. I still am saving cash with it, but just make sure it gets paid! I ended up setting up a auto payment every 2 weeks of $100 so yes I was paying it off faster than I needed, but it'll always get paid before it's due.


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## Addy (Mar 12, 2010)

How do you guys get these 0% offers? We have excellent credit, no debt (other than a cc balance which we pay off in full each month). We pay no interest other than $1 or $2 per year on our LOC so we can continue using it as a chequing account. Is it because we don't run a regular balance - does this prevent us from receiving the 0% offers perhaps?


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## dilbert789 (Apr 20, 2010)

Addy said:


> How do you guys get these 0% offers? We have excellent credit, no debt (other than a cc balance which we pay off in full each month). We pay no interest other than $1 or $2 per year on our LOC so we can continue using it as a chequing account. Is it because we don't run a regular balance - does this prevent us from receiving the 0% offers perhaps?


We just get them in the mail. I was offered 0% and my wife was offered 1.99%. Both from MBNA. I'm not sure what criteria got us flagged to their mail list...


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## HaroldCrump (Jun 10, 2009)

Addy said:


> How do you guys get these 0% offers? We have excellent credit, no debt (other than a cc balance which we pay off in full each month). We pay no interest other than $1 or $2 per year on our LOC so we can continue using it as a chequing account. Is it because we don't run a regular balance - does this prevent us from receiving the 0% offers perhaps?


Folks go through great lengths to _stop_ getting this junk in the mail, and you _want_ it?
I think if you call the banks, credit card companies and institutions you have a relationship with and ask them to _share your information with partners for promotion purposes_, I'm sure they'll be more than happy to oblige.
Then...wait a couple months and the offers will come flooding in.


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## Jungle (Feb 17, 2010)

dilbert789 said:


> I'm about 8mths in on a 15mth 0% offer from MBNA. They gave me 10k, so I transferred over money from a 7% LOC onto it. One giant gotcha to watch for that I got stung with was that they're billing cycle is like 28days, So if you setup an automated bill payment from your bank to pay say $100 a month, eventually it'll screw you because the bill date becomes earlier and earlier every month. I ended up getting a like $360 interest charge and they dropped my 0% rate. After calling and asking nicely, they reinstated the 0% and dropped the interest charge to $100. I still am saving cash with it, but just make sure it gets paid! I ended up setting up a auto payment every 2 weeks of $100 so yes I was paying it off faster than I needed, but it'll always get paid before it's due.


WOW, they are so nice to let you have the 0% back. Good for you, like I said above, do not miss one payment.


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## Jungle (Feb 17, 2010)

Addy said:


> How do you guys get these 0% offers? We have excellent credit, no debt (other than a cc balance which we pay off in full each month). We pay no interest other than $1 or $2 per year on our LOC so we can continue using it as a chequing account. Is it because we don't run a regular balance - does this prevent us from receiving the 0% offers perhaps?


There is a link on RFD where you can apply online. Not sure if Frugal will let me post it here. Just go to the Redflagdeals forum, search finance section, it's called MBNA 0% offer # 2.


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## Jungle (Feb 17, 2010)

dilbert789 said:


> One giant gotcha to watch for that I got stung with was that they're billing cycle is like 28days,


As of Sept first the gov moved it all down to 21 day interest free grace period, or payment due date.


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## hboy43 (May 10, 2009)

hi:

I have been getting these type of offers for years from my existing relationships. One gotcha is that I can't use the card for anything else, because they apply payments to the lowest interest rate ie the offer, so I would end up paying 24% or whatever on all my purchases. I never got caught on this as I read the fine print.

hboy43


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## Scottlandlord (May 27, 2010)

R.O.V. said:


> I just recieved a credit card offer from MBNA that offers an introductory rate of 0% for 15 months. I was wondering if it would be a good idea to apply for the card and use the money transfer som of my LOC debt on which I pay Prime + 1.5%. Or is this some kind of trap that will inevitably make money from you in other ways.
> 
> In the other fees section it states there is a 1% fee for transfers, cash advances etc. No annual fees.
> 
> Any advice appreciated.


Be careful. 15 months can go by very fast. Then their huge rates jump into play.


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## dilbert789 (Apr 20, 2010)

hboy43 said:


> hi:
> 
> I have been getting these type of offers for years from my existing relationships. One gotcha is that I can't use the card for anything else, because they apply payments to the lowest interest rate ie the offer, so I would end up paying 24% or whatever on all my purchases. I never got caught on this as I read the fine print.
> 
> hboy43


My understanding with the new law changes in Canada, payments must be applied to the highest interest portion first.


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## hboy43 (May 10, 2009)

dilbert789 said:


> My understanding with the new law changes in Canada, payments must be applied to the highest interest portion first.



That would be an interesting development. Of course it might mean that these offers will disappear if those who don't read the fine print are no longer providing a subsidy to those who do.

hboy43


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## MoneyGal (Apr 24, 2009)

I can't find a good reference on this, but there is some uncertainty about how promotional interest rates will be affected by the new regulations. I'll post if I find a good link.


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## Seth (Aug 16, 2010)

Any updates on you guys who took advantage of this switch?

We're currently carrying about 7k in CC debt on an 11% interest rate...

I've got Scotia bank ringing my phone off the hook trying to give me a 10k CC and I'm thinking I leverage that into an MBNA offer...

Phone them up, BT all 7k and pay it off at $500 a month to a zero dollar balance 30 days before my 15 months is up!


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## plen (Nov 18, 2010)

Seth said:


> Any updates on you guys who took advantage of this switch?


It's a fantastic opportunity provided you have good financial habits, all of them highlighted upthread. It's easy to manage it accurately by using internet banking and visiting MBNA's onlineaccess.ca site for the card. 

It's nice to know if the market corrects/plummets/freefalls I can also consider writing a cheque cash advance to find some really good opportunities, again provided I don't extend myself beyond what I know I can repay.


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## Causalien (Apr 4, 2009)

These kind of offers flare up right before a crash. In the 2007-08 period the same thing happened and from 2008 onwards, there were no offers of 0% transfers. 
I was lucky enough to consolidate all of my Credit Hacking strategies into one single 1.99% lifetime balance transfer before the music stopped. 

Usually only one banks does it at a time, last time it was citi, this time it is MBNA. Then when they stop the flow of money for 2 years, it forced those who are on this type of plan to go onto the max penalty rate and earn money from that. Then again, I've only been through this type of cycle once myself. Anyone heard of this strategy from 10 years ago?


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## carverman (Nov 8, 2010)

Jungle said:


> Hey Brian123
> 
> Yes you could just pay the balance out at the end of 15 months. To get another offer, you have to re-apply again. Problem is, nobody knows if MBNA will keep doing this offer 15 months from now.
> 
> ...


This scheme is almost similiar to the H-D store card..buy now and put it
on your card with no interest for 6 or 12 months...but then they hope you
forget bout it, and the interest piles up at 29.9%...as soon as you are
past one day on the due date..they "whack" you with the high interest 
charges....but for those that can manage it..it's a creative way to defer
payment while using your money for other purposes.


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