Question about Line of Credit vs. Credit cards

[cgyITguy]

Ok so I have about 10 K available on a line of credit, and about 15 K available on credit cards (currently balances of 0)

Now the obvious advantage of the Line of Credit is a much lower interest rate, yet the downside is that there is no grace period and the interest starts immediately after usage.
Where as the credit card has higher interest rate yet you get 30 days or so before you have to pay anything.

Now my question would be, if I were to need to purchase something that I maybe couldn't payoff all right away, would it not be best to buy it on credit card...wait the 30 days or what ever the grace period is, then pay that off with the line of credit, thus getting the best of both worlds ???

is there any downside or hitch to this strategy ?

[Skyline_Addict]

the downside is that you're still in debt after the fact.

but yes, you are mitgating your overall interest costs in the short term.

[cgyITguy]

ya obviously paying it down completely is the best option, I don't intent on getting any unnecessary debt, but in the event that I need to, I was just pondering that as an option

[lint]

It's always a good idea to pay off the balance of a CC every month, even if you have to draw from your LOC. Just don't let it get out of control.

[Kloubek]

Your plan of paying your card off with a LOC is a good one.

But keep in mind you shouldn't really be buying things you can't afford. That's how people get caught in the quicksand we call debt.

[Senseiz]

Originally posted by cgyITguy

buy it on credit card...wait the 30 days or what ever the grace period is, then pay that off with the line of credit, thus getting the best of both worlds

Credit cars have it set on a billing cycle. Mine goes from 15th to 15th of each month (approximately). So, if you make a purchase a few days before 15th and gets submitted to your CC, it will appear on the bill and you get 15 business days (I think) to pay so it usually lands at the beginning of the month.

You can be smart and make the purchase after the 15th of the month so it goes on the next billing cycle and gives you another 30 days compared to the first scenario.

And yes, if after those days, you still do not have the cash, use the line of credit.


A line of credit is a short term loan with interest accrued daily based on prime rates + x%. Small business that lack the big capital have a big line of credit because when they invoice their customers, the customers are given 60 (or 30) days to pay. And if that small company needs supply and has no capital, they will draw it out of the line of credit.

[ExtraSlow]

If you "need" to buy this item before you save the money for it, your plan is sound. I've done this before.

[canadian_hustla]

Originally posted by cgyITguy
Ok so I have about 10 K available on a line of credit, and about 15 K available on credit cards (currently balances of 0)

Now the obvious advantage of the Line of Credit is a much lower interest rate, yet the downside is that there is no grace period and the interest starts immediately after usage.
Where as the credit card has higher interest rate yet you get 30 days or so before you have to pay anything.

Now my question would be, if I were to need to purchase something that I maybe couldn't payoff all right away, would it not be best to buy it on credit card...wait the 30 days or what ever the grace period is, then pay that off with the line of credit, thus getting the best of both worlds ???

is there any downside or hitch to this strategy ?

Pros:
1) you defer the interest for 21-30 days depending on the credit card provider. The grace period ONLY applies to point of sale purchases (i.e. mastercard cheques, cash advances, non-qualified transactions are usually not elgible)

Cons:
1) stores pay merchant commission fees and therefore they may not give you as good of a deal (or a discount) as they can pay between 1.5%-3.0%. More if you are using a business credit card

Recommendation:
If you can debt service 3% of the balance/month I would do the following:
1) Get a greal deal AND use your credit card for the purchase
2) immediately pay it off with your line of credit (usually prime + a few %, mine is 8%)
3) use a mastercard balance of account transfer cheque and transfer the balance of the line of credit to your mastercard. Current BAT promotional rates are around 4.9% for 6 months. Only caveat is you have to make 3% of the total balance as your monthly payment
4) Once 6 months pay the credit card with your line of credit


LOL good luck!

[Supa Dexta]

I would buy on the LOC keeping enough for interest (I think 10k is like 50$ a month?) And then use cc for personal purchases needed thru the month. Provided you had any LOC left I'd be paying the cc off, or using any income to pay off cc before loc.

The best way to view a CC is, to think of as being handy to not have to carry cash, as well at get rewards, but not as an available loan... A free debit card if you will, use it all month for free, but only for money you have.

[Xtrema]

Just make sure track what you use. CC make it very easy to get out of budget. But your plan is sound.

[Dumbass17]

anyone know how to check the billing cycle of the credit card?

i feel like a dummy for not knowing that it's best to have no balance every 'month'

i usually just use it and pay if off when i can, but not according to this billing cycle?

[Supa Dexta]

Your statement should say "march 21st to april 20th" or something of the sort.. They've changed mine a time or 2 though. Not sure if they do that to try and catch you or what.

[berbatov]

Recommend using CCs with cash back percentages in this scheme

[cgyITguy]

Originally posted by berbatov
Recommend using CCs with cash back percentages in this scheme

Yes I absolutely will do that, I always have used cash back cards and put every expense and every little thing all year long on the card, and come December I always get a good return

[ballah]

Originally posted by cgyITguy
Ok so I have about 10 K available on a line of credit, and about 15 K available on credit cards (currently balances of 0)

Now the obvious advantage of the Line of Credit is a much lower interest rate, yet the downside is that there is no grace period and the interest starts immediately after usage.
Where as the credit card has higher interest rate yet you get 30 days or so before you have to pay anything.

Now my question would be, if I were to need to purchase something that I maybe couldn't payoff all right away, would it not be best to buy it on credit card...wait the 30 days or what ever the grace period is, then pay that off with the line of credit, thus getting the best of both worlds ???

is there any downside or hitch to this strategy ?

this is a good strategy especially if your credit card has rewards to it (ie: travel rewards, cash back, merchandise, etc)... use the credit card, and use the line of credit to pay off the balance (your line of credit should have a much lower interest rate)... and just pay off the line of credit and accumulate points on the credit card....

i do this and it works really well... i rarely use my debit card as well....