Balance Transfer for Offset account

Discussion in 'Property Finance' started by cheekykoon, 1st Sep, 2016.

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  1. cheekykoon

    cheekykoon Well-Known Member

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    Hi, wondering if anyone would do this.

    Credit card offers 3% processing fees for 6 months 0% interest free repayment period.

    Say Take a balance transfer at processing fees of 3%, put it into offset account to offset interest on mortgage of 4.15%. Can the balance transfer processing fees be tax deductible?

    Would there be an overall savings? loss?
     
  2. Scott No Mates

    Scott No Mates Well-Known Member

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    Transferring from CC to offset is a cash advance and will be at your cc interest rate - 18%+
     
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  3. cheekykoon

    cheekykoon Well-Known Member

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    Hi Scott, during promotional period, it would only be a processing fee of 3% and 0% interest, normally for 6 months.
     
  4. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    It would not be deductible as the purpose (putting funds in an offset) is not a deductible purpose.
     
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  5. cheekykoon

    cheekykoon Well-Known Member

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    Technically Speaking...

    3% upfront fees plus repayment of interest free 1-3% outstanding fees, works out to be about 6-7% fees per annum, whilst offset, saved 2.075% per annum, nett borrowing cost is about 5% per annum.

    Wondering if this can be used for business expenses and for tax deduction?
     
  6. cheekykoon

    cheekykoon Well-Known Member

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    Thanks Jess, Well, if its not tax deductible, that leaves funds financing at about 5% per annum nett.
     
  7. Terry_w

    Terry_w Structuring Lawyer and Finance Broker - all states Business Member

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    You would be borrowing to park in an offset. It could be deductible under limited circumstances - see my tax tip 1
     
  8. Jamesaurus

    Jamesaurus Well-Known Member

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    Bit of brainstorming on this strategy here.....So over the last year there have been a few CC's on the market that offer 0% BT- has anyone taken advantage of this and been able to transfer the funds into their offset account.

    Would it be then possible to have this sit there for just short of the interest free period?
     
  9. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    I believe cash out won't be a zero interest.

    If can be done in a round about way and you can get the cash without a big fee then yes the interest saving will help.

    Ta

    Rolf
     
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  10. Ben_j

    Ben_j Active Member

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    This only works if you do the balance transfer to a card with $0 owing, which will then put it in credit - you can then transfer the money to your offset, saving interest and transfer it back before the 0% rate expires.

    It’s not worthwhile unless he balance transfer is free.
     
  11. Terry_w

    Terry_w Structuring Lawyer and Finance Broker - all states Business Member

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    I did it years ago. Cash out on cc 1, then balance transfer to cc2 with a special 1 year interest free. after a few months i forgot to pay on time and lost the interest free period and I had to pay the whole thing out.
     
  12. Jamesaurus

    Jamesaurus Well-Known Member

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    So my thinking is this:
    CARD A: Use existing card with limit 10,000
    CARD B: open up card for 10,000 for balance xfer ( some banks will only do 90% balance xfer of the limit)

    Instructions to bank :
    CARD B: request BT of 10k to Card A with balance of $0 this will put card A into 10k credit.
    CARD A: Withdraw that 10k form the credit card and put into my loan account.


    I'm thinking of using
    one of these two as CARD B, as the BT is free:
    https://www.finder.com.au/st-george-vertigo-platinum-credit-card-online-offer
    https://www.finder.com.au/woolworths-everyday-money-credit-card-details-and-application
     
  13. Ben_j

    Ben_j Active Member

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    What you’ve described abov I’ve done in the past. The only other thing to look out for is then limit of BT’s you can do annually as some cards limit it to 1.
     
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  14. evalord

    evalord Well-Known Member

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    Withdrawing cash is not the same as buying something with your credit card. If what the OP is thinking can be done, everyone would be paying their mortgage repayments with credit cards, combine that with a redraw facility = unlimited cc points.
     
  15. Ben_j

    Ben_j Active Member

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    @evalord it only works if the cash is withdrawn from a credit card with $0 balance initially so the balance transfer makes it a positive balance.
     
  16. Ross Forrester

    Ross Forrester Well-Known Member Business Member

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    I tried to do this once. I gave up because of the paperwork involved for not much in real savings. I was really trying to be smart and the effort was not smart.

    Anyway, the application for the credit card was on my credit record for a damn long time.
     
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  17. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    I have more than one borrower on my books that has done the cash or points thing,forgetting the main game........... and cooked their file.

    Had one recently whine that because they used a broker, and their friend went bank direct and never had a problem with getting a loan, that we "may" have caused them a file issue............

    7 unsecured debt apps in 2 years on the file as it turns out, and 5 more for a loans.com application done direct ................. yup DYI microwave credit file alright.

    ta
    rolf
     
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  18. Athikalaka

    Athikalaka Well-Known Member

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    I recall a few years ago, proving to my lender I no longer have those credit cards, with an official letter from the card providers that I've closed my account. If evidence is provided, will this be enough? Despite having that mark on file?
     
  19. Hockey Monkey

    Hockey Monkey Active Member

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    Is it the credit card or loan applications that would have done the most damage?

    My wife and I churned 9 credit cards last year and our credit scores hardly budged
     
  20. Terry_w

    Terry_w Structuring Lawyer and Finance Broker - all states Business Member

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    Not enough for some lenders that credit score. Multiple hits can destroy a loan. I have one client with a credit card company doing a check ever 2 months. She was rejected for the loan on the basis of too many credit hits.
     
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