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July 9, 2009
Credit Card as LOC?
I don't want to get stuck without money after buying a multifamily so I was thinking of applying for a credit card (maybe two) which will have a very low APR which I will use as a "back up" line of credit...Has anyone tried this? Any card recommendations?
Comments
don't apply for too many cards around the time you are getting approved for a mortgage, it could mess up your credit score. Also, keep in mind banks are getting rid of low fixed rates on credit cards... also, I don't think it's safe to assume a credit line on a credit card will be there indefinitely, since they seem to be cutting them on people.
Anyway, in general if you need to pull out cash from a credit card, you shouldn't be buying a home.
How about a margin loan or 401k-loan instead as a "plan B"?
Posted by: oe at July 9, 2009 11:31 AM
one word , crazy
Posted by: brickoven at July 9, 2009 12:06 PM
As a back up line of credit, the best credit card in the world would be about 45th thing on a list of things to use for one. Seriously, don't go there : )
Posted by: jland at July 9, 2009 1:39 PM
We did do this some years ago as we had a lot of renovating to do and our cash on hand wasn't going to cover everything. We also refinanced once all the renovation was done and got rid of the cc debt...but that was back in the day of easy mortgages.
If you decide to get a credit card, keep in mind that most contractors don't take them, so you end up having to take a cash advance--which is always waay more expensive. Plus on a $10k card, the cash advance limit might be half that at best.
Posted by: tinarina at July 9, 2009 1:50 PM
When will people ever learn???
Posted by: daveinbedstuy at July 9, 2009 1:57 PM
Picture Suze Orman shouting, "HAVE YOU LOST YOUR MIND?"
Posted by: DitmasSnark at July 9, 2009 1:58 PM
you know what interest rate is on a credit card?
No way. Asking for bankruptcy.
Posted by: Petebklyn at July 9, 2009 2:05 PM
We were in the same boat as tinarina in 2004, refinanced as well. Considering the current climate, and the fact that CC are now jacking rates for zero reason, this is a bad idea in my POV.
I'd try for the HELOC first. CC as a last resort.
And there are always hard money lenders out there. Try Vinny on 66th St. ;)
Posted by: Action Jackson at July 9, 2009 2:39 PM
A terrible idea. This is how people get deeply in debt and ruin their credit.
The credit card companies lure you in with low interest rates, but they are teaser rates. The rates can shoot up at any time for almost any number of jacked-up reasons. You can try to switch to another card but you will find there are a lot of transfer charges and also high rates. One day you find yourself paying $400 a month on a debt of $2,000, with $100 going to the principle and $300 going to interest. Multiply that by whatever you were planning to borrow. Don't forget the $100 "late" fee if you happen to pay your credit card early that month.
It's a black hole you will never crawl out of.
Posted by: mopar at July 9, 2009 3:11 PM
Very bad idea indeed ...
Anything can happen after you close: no or insufficient rental income, unexpected repairs, ... Assuming that a credit card can be a 'Get Out Of Jail' card is simply crazy.
Posted by: lostintranslation at July 9, 2009 4:21 PM
In all fairness, the man didn't say he would use them, he said he would hold them as a backup for contingencies. Still a heloc would be better--much lower interest rate.
Posted by: denton at July 9, 2009 5:22 PM
If you are going to get CC get them at useful places like Home Depot and Lowes-even Ikea; HD especially is good since they typically offer you (at least I still get these offers monthly)no payments on anything over $299.00. So if you have building supplies or appliances to get or really anything home related HD and Lowes are good (I think lowes also offers this no payment for a year deal).
This takes planning and disciplined budgeting to make sure the balance is paid off within the year (or moved) so you don't get hit with outrageous interest.
This was pretty helpful to me when I initially bought. A few years later I got a HELOC and it's rarely used but it's good as a back-up for big sudden expenses which can happen as a homeowner.
Posted by: argentina at July 9, 2009 7:07 PM
It's a little bit like an ARM. You don't know what the interest rate will be.
Posted by: mopar at July 9, 2009 11:06 PM
I have a bunch of credit cards sitting in a box at home. I only use one or two regularly. I pay the full balance every month without fail. Whenever possible I set up automatic payments with the credit card company so that they debit my checking account for the payment - that avoids late fees (assuming there's money in the bank to cover the payment, which there always is). I make sure I make one purchase on each card every six months to keep them active and working for my credit score. They are not my emergency fund nor would I use them to finance a renovation. When the banks used to send those checks, I would shred them as soon as they arrived - those checks can be used to pay a contractor who doesn't take cards, and as long as they're not made out to you or to cash, some banks will process them as a purchase, with a 3% fee to make up for the lost merchant fee. I have not seen credit card checks in the mail for a very long time. I used to get one at the bottom of every Washington Mutual statement, but since they got bought by Chase that has stopped.
If you are going to be a landlord, you will need a credit card, because you can guarantee that your rental unit is going to need an emergency plumber at some point and it will be the time when your checking account is particularly empty.
Posted by: bohuma at July 10, 2009 3:15 PM
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