Join Australia's most dynamic and respected property investment community

Using free money from BT?

Discussion in 'Accounting & Tax' started by benk, 6th Feb, 2016.

  1. benk

    benk Member

    Joined:
    8th Aug, 2015
    Posts:
    18
    Location:
    sydney
    House likes this.
  2. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,669
    Location:
    Melbourne, Nationwide
    The flaw is that the 0% interest only applies to a balance transfer.

    Using your CC to pay off your mortgage is a cash draw-down, which in most cases is charged at full interest. In many cases cash draw-downs even ignore the 55 day interest free period.

    This effectively uses an 18% credit card to try pay off a 4.5% mortgage.

    There might be some cards that aren't subject to this, you'd have to read the (very fine) print.
     
    Perthguy and JacM like this.
  3. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,669
    Location:
    Melbourne, Nationwide
  4. Hodor

    Hodor Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,080
    Location:
    Homeless
    I only know one person to do a balance transfer. You could only transfer 70-80% of the outstanding balance (limit wasn't the problem) is this common or unusual? Could leave you stuck with a portion at high rates
     
  5. Terry_w

    Terry_w Structuring Broker and a Structuring Lawyer Business Member

    Joined:
    18th Jun, 2015
    Posts:
    12,234
    Location:
    Remote
    There are a few threads on this here already.

    I did it once when I bought a car. It all went fine for months until I accidently was later with a payment.
     
    The Y-man likes this.
  6. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    1,648
    Location:
    Gold Coast
    can have credit score implications depending on the quality of your file to start with

    ta

    rolf
     
    JacM likes this.
  7. benk

    benk Member

    Joined:
    8th Aug, 2015
    Posts:
    18
    Location:
    sydney
    Thanks, I understand there is a degree of risk to it (ie forgetting payments and can affect credit ratings) but that all seems controllable to me. Would this be considered "parking borrowed money in an offset"?
     
  8. Terry_w

    Terry_w Structuring Broker and a Structuring Lawyer Business Member

    Joined:
    18th Jun, 2015
    Posts:
    12,234
    Location:
    Remote
    It won't matter as long as you are not trying to claim any interest on the card and have no existing borrowed money in the offset.
     
    benk likes this.
  9. Bullion Baron

    Bullion Baron Well-Known Member

    Joined:
    25th Jul, 2015
    Posts:
    717
    Location:
    Adelaide, Australia
    There is no downsides to doing this for a PPOR loan is there? I cannot think of any and just received an offer for a balance transfer so was looking at doing the following:

    upload_2017-2-9_17-33-50.png
     
  10. Perthguy

    Perthguy Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    7,707
    Location:
    Perth
    And we thought carbon tax was a money-go-round. Realistically, how much difference would a plan like this make?
     
  11. Bullion Baron

    Bullion Baron Well-Known Member

    Joined:
    25th Jul, 2015
    Posts:
    717
    Location:
    Adelaide, Australia
    Perhaps only a couple of hundred dollars a year saved using a $5,000 credit card, more worthwhile with a larger credit card... but considering it would take around 10 minutes work I don't see the harm.
     
    Perthguy likes this.
  12. Elives

    Elives Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    619
    Location:
    Queensland
    I've recently maxed my borrowing capacity so i decided to do this while i renovate a property. i could only afford 15k cc (bt 80%) 12.8k at 4% (sitting in ppor offset) $512 p.a or before tax $13.10 p/w i got the annual fee waived as well.

    i also took out another cc for every day spendings i did the numbers ages ago i think it was around $50 a month/2nd month worth of fuel vouchers and money saved using it and keeping pay in offset account maybe another $300-400 p.a?

    this is hardcore penny pinching haha.
     
    Perthguy likes this.
  13. Propagate

    Propagate Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    376
    Location:
    Melbourne
    My old boss in the UK did it about 10-12 years ago, he ended up juggling around 100k (GBP) around various cards, had a big spreadsheet to track it all. He made about 4-5k from memory over about a year (GBP) until eventually no one else would give him a card. By the end he was spending so much time trying to keep track of it all, one or two missed payments would have really hammered him.

    I can imagine trying to replicate that here would have a huge impact on your serviceability having so many "live" cards on the go, not to mention what your credit file would look like. Not sure it's worth the hassle for what you'd make out of it?
     
  14. Terry_w

    Terry_w Structuring Broker and a Structuring Lawyer Business Member

    Joined:
    18th Jun, 2015
    Posts:
    12,234
    Location:
    Remote
    I did this many years ago when I bought a car - juggled $20,000 for about 6 months and then missed a payment date by mistake. So I had to quickly pay it out.
     
    Elives and Marg4000 like this.