Cash-advance checks

[taxguykarl]

My credit card limit just increased by another $1K. To 'celebrate' (their words) the issuing bank sent me a batch of cash-advance with a generous rate--the fine print, of course, reveals it to be a teaser.

Needless to say, those checks met my trusty paper shredder

My question does anyone (yes, including people you know) ever use those?

Please satisfy my almost morbid curiosity.

[HYHYBT]

If you have another debt that costs more to carry, and the teaser is good long enough to pay it off (or at least get most of it), then it's not such a bad deal. But that's a 300-point "if'.

[Rapscallion]

The gubmint over here stopped credit card issuers from arbitrarily raising limits as they felt like. Must admit, I've got access to far more credit than I'd like to have hanging over me. I think I once used around about the initial limit on the credit card (though some years after I got it) for a large purchase, with the cash behind me to pay for it immediately. However, I have access to over four times that initial limit.

Rapscallion

[r2cagle]

I'm in the process of refinancing my mortgage and will be paying off our credit card balance.... I'm betting we get an increase in limit and lower interest teaser. We haven't used the cc in 9 months, so I'm sure the payoff is going to trigger some flags, especially since we've been a customer for 13/14 years.

[draggar]

Yeah, those checks are nasty. Not many people realize that not only when you use them it's considered a cash advance but also cash advances on your credit cards are at a MUCh higher rate.

Luckily, I never used them.

[trailerparkmedic]

People do use the checks. When I worked at the One Credit Card Company, our low rate checks generally didn't have up front fees, so they could be pretty good deals. People often deposited the checks in their bank accounts to get the cash if they wanted the low rate on a big purchase, like appliances or home improvements.

The credit card company I currently use charges 3% for the checks they keep sending me, so it's less of a good deal. Otherwise I'd be tempted to put a semester of college on at 0% and not have to pay the installment fees at school.

Not all checks are cash advance checks. Some are at your purchase APR, some are at your cash advance APR, and some are at a lower APR than your purchases. Sometimes the low APR is for life, sometimes it is for a set time and then increases to your purchase APR.

The way the credit card companies get you is if you have a balance at your purchase rate and use a check/do a balance transfer/etc at a lower interest rate. The One Credit Card Company put your payment towards interest, then the balance with the lowest APR first. Essentially, you pay off the lower interest rate before you even touch the balance with the higher APR. I'm not familiar with the policies of other credit card companies, but One Credit Card Company was generally nicer than my main credit card company, so I wouldn't be surprised if this was a widespread practice.

This is also another reason that cash advances are BAD, since the cash advance will be at a higher APR than your purchases. That didn't stop plenty of customers from doing cash advances, sometimes in $20 increments (with a 3% or minimum $10 fee) all night long...

[BookstoreEscapee]

I get those checks in with every Discover bill. They go straight into the shredder.

[tollbaby]

I always shred those right away. I also asked my bank not to increase my credit limit, and in fact had them reduce it considerably last year. Too much credit can be a VERY, VERY BAD THING!

[Primer]

I always shred those right away. I also asked my bank not to increase my credit limit, and in fact had them reduce it considerably last year. Too much credit can be a VERY, VERY BAD THING!

Dumb question here, but why would a high credit limit be bad? As long as you don't go overboard and charge more than you can pay off within a reasonable amount of time, that is. I would guess that I have about $100K available, but I rarely have a balance above $1K, and I almost always pay the whole balance off every month, and always within 3 months.

As for the checks, back before I got my finances under control (about 15 years ago) the checks frequently came with no fee, and 0% interest for 6 months or so. I really did use my Mastercard to pay my VISA, and vise versa. These days? No. They go straight into the shredder.

[r2cagle]

I'm not an expert, but I think that too much credit available that is not actually in use, lowers your FICO and credit rating scores. It doesn't make sense to me either, but something about the debt to income ration versus possible debt?? Maybe someone else can explain it better.

[taxguykarl]

First of all: Thanks to all who replied. You satisfied my curiosity.

I'm not an expert, but I think that too much credit available that is not actually in use, lowers your FICO and credit rating scores. It doesn't make sense to me either, but something about the debt to income ration versus possible debt?? Maybe someone else can explain it better.

There are quite a few articles on FICO.
From the horse's mouth:
Payment History.............35%
Amounts owed...............30%
Length of credit history..15%
New credit......................10%
Types of credit used.......10%

If you delve into their commentary you can easily be forgiven for wondering if you are reading a chapter of Catch 22

Note that income is not a factor.

It's not for nothing that Dave Ramsey calls FICO an "I love debt score."

[r2cagle]

Yeah, yeah... "google is my friend".

I'm happy if I understand just enough to make a semi-decent decision. I prefer to pay the experts. They're worth it.

Though to be honest, if I actually understood, in depth, the stock markets, credit ratings, etc.. we would have refinanced our mortgage last year, instead of right now. I think we are getting a better deal now than we would have this same time last year. Sometimes, ignorance is bliss.

[Primer]

oh well. All I can say is that when I cosigned for DH to buy a "new" '07 Silverado PU in Oct of '07, that the guy in the dealership's finance office said he'd never seen a credit rating so high before.

[Magpie]

I thought that the too much credit thing would affect how much credit you could get without affecting your credit score. Basically that when they decide how much they will loan you they assume that you are going to go and max out all you available credit, so it's all treated as debt.