Pulling Cash from Credit Cards: Most Inexpensive Current Method?
Des Plaines, IL · Member since 2013 · 38 posts · 4 votes
Anyone have any thoughts on this?
My 2 favorites I know of:
-PayPal'ing the cash to myself (3% fee). Although they've given me a slap on the wrist for this.
-Amazon WebPay'ing the cash to myself (0% fee). But they have a $1K/month limit, that they supposedly consider raising after some time.
Any good peer-to-peer, bank transfer, payment service deals I'm missing?
AAA gave me a credit card with a credit line of up to $30K. I got a triplex in escrow, but needed $45K to close. I called AAA and over the phone they bumped it to $50K, and while I was on the phone they wired the $45K I needed right into my account.
They also tow your car for free. You should get a AAA membership. Almost as good as a Bigger Pockets Pro account.
@Aaron Mazzrillo Do you consider Hard Money Lenders to fall into the category of "conventional lenders" that are "only in the business for themsevles" typically as well?
Beth,
I wouldn't call it bad idea, just not for everyone. I know I am not getting an unsecured loan for upwards of 40k @ 0% interest for a year ANYWHERE else!!!
These offers generally aren't offered to consumers unless they have stellar credit as the bank sees them as a very low risk to lend money to.
Trust me you are not getting these offers if you have poor or even average credit.
I look at it as a perk to having a great credit score/history with the big boys (banks)
bestregards,
Chris
Other than credit cards, you can obtain a HELOC from a credit union for 1.99% for the first 12 months. After the 12-month promotional period, it's prime plus 0.25%, or about 3.5%. Guess what, the interest is deductible unlike credit cards.
If you live in the Silicon Valley, you can obtain a loan up to 60% LTV at 4.25% with no docs. Did I say no docs? Yes, no docs. Cheap money is out there. Finding good deals, on the other hand, are not easy.
Minh,
Obtaining secured credit vs UNSECURED credit are two totally different things.
I would choose unsecured credit at 0% everytime vs secured credit.
You are putting your assets at risk which isn't necessarily a bad thing after all thats how lending generally works.. But if given the opportunity to obtain unsecured credit instead with better rate/terms it's a no brainer...
best regards,
Chris
Absolutely not! At least, not if you have a good hard money lender. There is a local HML here in town who requires an appraisal. It's only $375. However, they analyze the deal. If they don't think it is feasible, they tell you. They definitely are protecting themselves, but they are also preventing you from making a big mistake.
There is another HML out in L.A. who actually buys houses, then wholesales them to investors with loans in place. What bank is going to do that for you?!
My private lender just funded me 100% on a deal because at the moment I'm spread thin and I wouldn't have enough to cover the acquisition and full rehab required. He knows me, knows my success rate, and is comfortable knowing I will get him out of the deal unscathed.
Now, if I walk into the local conventional lender (we won't name any names) and show them my income, my expenses, and my tract record, do you think they will give me a loan? How about to buy an investment property? Not going to happen.
One of my favorites was the US Mint, (read the thread on flyer talk). You can't do this anymore but you used to be able to get cold hard cash in the form of dollar coins shipped from the US Mint paid for with a credit card with no fees, free shipping no less.
I, um, heard this was a great way to reach minimum spend for signup bonus airline miles. $1k in coins shipped free to your door, then to the bank to pay back the card.
Not quite, but looks like we will be heading that way in the next few years. FHA has recently loosened their lending standards for short sellers and foreclosure buyers too. History doesn't repeat itself, but it rhymes. However, the next housing crisis will likely not be as bad as the one we just went through. It was a once in a lifetime event that we just went through in my opinion.
You are putting your assets at risk which isn't necessarily a bad thing after all thats how lending generally works.. But if given the opportunity to obtain unsecured credit instead with better rate/terms it's a no brainer...
best regards, Chris
I agree with you. However, secure or un-secure, the money must be paid back. An unsecure debt can be wiped out with a BK filing, but so is a HELOC through lien stripping. In both scenarios, certain criteria must be met.
HELOC is the cheapest form of borrowing in my opinion. I've done hard money lending using my HELOC. I've borrowed money from credit cards to invest in mortgage REITs yielding 20%+ annual return. I've borrowed money from credit cards to buy houses right here in the Silicon Valley. I understand that they are two different forms of debt, but both can be lucrative if used wisely. For me, I don't distinguish them because I know I have to pay them back before the deadline.
Cheers.
Hey Minh,
Agreed both have their uses if done wisely, but again if given the choice unsecured vs secured debt I would opt for unsecured debt. If things took a turn for the worst the roof over my head isn't at risk.
Funny you mention Mreits as I invest in them as well. I do have a to say borrowing money from a credit card to invest in them is a bit too risky for me as these are fairly risky investment vehicles as they are highly leveraged and are very sensitive to interest rate moves.Things can go south very quickly. But they are great way to make some great returns in this low interest rate environment, long as you can stomach the fluctuations and keep an eye on the dividends as they tend to vary by qtr...
best regards,
Chris
I just did this to finish up a renovation on our 6-plex, had the money for the reno, but it would have wiped most of our liquid cash. So I got the 0% for 12 months 3% fee check, wrote it to myself(business), and contractors got to work!
Guys, I never thought of using credit cards this way..m pretty nice..
Now so you guys the monthly payment or do yo u wait until the end of the term?
Lets say you took a cash advancr of 25k at 2%...
Do you pay the mobtly minimum payment pf just wait till the end of the term to pay it all off, after your profit?
Thanks..
I also made use of credit cards (balance transfer) to supplement my funds to buy an investment property in cash - about 40k payable in 12 months for 2% transaction fee. I most likely would not have gotten the property if I didn't use this balance transfer offer as I was short for a full cash offer. One caveat as Aaron said is that you have to have ready funds to pay it back at or before the term ends. I also used balance transfer to pay for a car and a tuition (both at 0% transaction fee at that time) payable in 12 mos. I paid them off at the time they were due on both occasions. So balance transfer is extremely useful for someone disciplined. But if you are to try it, start on a small amount - to see if you are disciplined enough to make it work. Also, if you are to try it, prepare to retire your credit card(s) until the amount is fully paid - don't even put it in your wallet to avoid accidental use. Be aware also that your credit score is going to take a hit depending on your utilization ratio (e.g., if you have 40k limit and used 30k of it, your credit score will dip). So spread the balance transfer on several cards if you have several. As to whether to pay the monthly payment or pay in full at end of term, you can do either, but at least must pay the minimum payment so that the regular interest rate will not kick in. Balance transfer is my go-to way of financing big purchases (except the mortgage on my primary) - and until this last balance transfer, I did not even have to pay interest or financing charges. What a kick! :-).
@Isaac Dominguez You'd have to at least pay the minimum monthly amount due. But if you plan to pay it all off before the 0% or promo ends, just have a plan to make that happen...or transfer again to another offer, but just keep in mind that'll be another transfer fee. :-)
@Nicole A. Just to clarify, credit utilization is 30% or so of your credit score, so saying it's not going to matter much that you carry a full balance on your credit cards is false. Maxing out your cards can have a significant impact on your score.
@Matt C. There are several sites offering credit scores out there, and most are pretty inaccurate. The closest you can get is through myfico.com, which uses true Fico scores.
if I max out a line of credit (say $40k) and pay it back within a year, would that also have an adverse affect on my credit score?
Scott,
When the card is maxed out your overall utilization will increase which will bring your score down (temporarily) once this is paid back your utilization would go back to what it was originally and your credit score would adjsut accordingly.
the drop in credit score is just a temp. thing and a small price to pay for whsat you are receiving in return IMO.. I believe credit utilization represents areound 30% over your overall score so there are other factors as well......
best regards,
Chris
It is cool to hear so many people using credit cards smart to make some money off of their good credit.
I like to think what is the point of having good credit it you aren't going to monetize it!
Some of the ideas about ways to use them and avoid the transactions fees are interesting. Not sure how viable they are in many situations but interesting to keep in mind regardless.
Since I deal with HML regularly I look at a 3-4% up front fee as standard and if I can get it with out double digit interest and secured by 1 or more properties then I will take that all the time!
Another good way to use them when doing real estate projects is getting a bunch of your materials and put the on your HomeDepot or Lowes Cards and anytime you spend over $299 you get a minimum of 6 month deferred financing. You can usually just ask for 12 and they will give it to you. They will need to get a manager and can take 10-15min or more. Probably not worth it on a $350 order but on a $3,500 one it is a good use of time.
BTW at least at HD GCs can be bought with a HD Card and can count towards the financing deals. So if you buy like $251.35 of stuff you can get a $50 GC and then get the deferred financing. Or you can just buy a $300 GC get the deferred financing and use it for any miscellaneous little purchases for a project. Or buy a bunch of smaller ones and give them out to your handymen/maintenance people 1 at a time and tell them to use it for supplies and only bill you the labor. Or a good one is buy a dozen $25 ones at the end of the year and give them to business associates as holiday gifts, write them off on your taxes and don't have to come out of pocket until June.
We purchased our two duplexes (1 at a time) with credit card direct deposits. My wife and I both otherwise had no credit card debt, so we had a bit available to us unused. We used my wife's 'line' solely in case we couldn't make repayment (I'm the primary earner). She's had these cards only in her name prior to us even getting married.
Repayment wasn't always as planned, but I had a few 'backup' plans. Since I'm fairly new, 12 months was scary, I waited until they CC companies offered closer to 18 months.
Worked out for us and it's something I will keep in my pocket of tools...but I think having backup plans (plural) is the only 'safe' way to approach it.
Lets say you took a cash advancr of 25k at 2%...
Do you pay the mobtly minimum payment pf just wait till the end of the term to pay it all off, after your profit?
The card I mainly use does have a minimum monthly payment (principal only) that I make, but I hold the money full term even if I cash out the deal I used it on. Otherwise, I'm not getting the maximum benefit of the money and the cc company is getting a much higher return.
The card I mainly use does have a minimum monthly payment (principal only) that I make, but I hold the money full term even if I cash out the deal I used it on. Otherwise, I'm not getting the maximum benefit of the money and the cc company is getting a much higher return.
Yeah if it is on a CCard you will always have the minimum payment now.
Pretty sure one of the things that came out of the credit card reforms they did a few years back is requiring SOME payback on the balance every month. Before then some of the store cards offered no interest and no payments. Now the HD, Lowes etc. have payments.
I think it is a minimum of 1% but they can do more (I think Lowes must be like 2.5-3% as that payment is often higher than ones with much higher balances).
Aaron is also spot on about not paying it back until it is due. It is like our own investments where it is better to get cashed out faster (Assuming you aren't going for a long term hold) . If you pay a 4% fee with no interest on $20K for 18 months then you are only paying $44.44 per month essentially for the money but if you use it for a deal then pay it off after like 5 months then it is $160/month since it is a fixed dollar amount. Even if you have NOTHING to do with the money just plop it is a "high yield" savings account making like an amazing 0.4% and make an extra ~$80 before you have to pay it back.
Even if you are doing rehabs and using the money to fund those you should be able to turn the money over 2 times and possibly 3 pretty easy before the money is due (On and 18 month finanacing deal). So not only is it cheap but you avoid the transaction fee for the subsequent deals.
Aaron is also spot on about not paying it back until it is due. It is like our own investments where it is better to get cashed out faster (Assuming you aren't going for a long term hold) . If you pay a 4% fee with no interest on $20K for 18 months then you are only paying $44.44 per month essentially for the money but if you use it for a deal then pay it off after like 5 months then it is $160/month since it is a fixed dollar amount. Even if you have NOTHING to do with the money just plop it is a "high yield" savings account making like an amazing 0.4% and make an extra ~$80 before you have to pay it back.
After looking at this I feel I should clarify that I mean put it in the savings account for the last ~13months after doing the big money making deal the first 5. Obvioulsy makes no sense to absorb the fee ONLY to make interest that won't cover it.
For those of you that are concerned by funding your deals with CC's because of the balance to credit limit ratio affecting your current score, or preventing you from getting other forms of funding, ever consider having Unsecured Business Lines of Credit that report only to your Business and NOT to your personal credit report? For those of you that see the beauty in using CC's for your business, this would solve your problems.
@Minh interest on credit cards you use to purchase business assets is deductible if you own an LLC. The finance charges associated with the purchase for your business asset are treated like an additional business loan, even if its own your own credit card if it can be traced back to the business.You can research this here:
http://www.investopedia.com/terms/b/business-interest-expense.asp
and the IRS publication:
http://www.irs.gov/publications/p535/ch04.html#en_US_2012_publink1000243104 "
You can generally deduct as a business expense all interest you pay or accrue during the tax year on debts related to your trade or business. Interest relates to your trade or business if you use the proceeds of the loan for a trade or business expense. It does not matter what type of property secures the loan. You can deduct interest on a debt only if you meet all the following requirements."
Just wanted to clear up any misinformation. If you have an LLC, or Corporation or Business Entity, ANY interest paid by personal or business credit card used for your business, IS deductible.
and the IRS publication:
http://www.irs.gov/publications/p535/ch04.html#en_US_2012_publink1000243104 "
You can generally deduct as a business expense all interest you pay or accrue during the tax year on debts related to your trade or business. Interest relates to your trade or business if you use the proceeds of the loan for a trade or business expense. It does not matter what type of property secures the loan. You can deduct interest on a debt only if you meet all the following requirements."
Just wanted to clear up any misinformation. If you have an LLC, or Corporation or Business Entity, ANY interest paid by personal or business credit card used for your business, IS deductible.
You do not need to have an LLC in order to deduct the interest. It simply should be used 100% for business otherwise you need to keep STRICT records indicating how much interest is allocated to personal/business.