Credit cards over a loan

robpost

Seems like it's much easier to get credit cards over a bank loan, so assuming an individual was sound with money (and their credit status allowed for it) and needed financing of 3k, why not get 6 credit cards (total value 7k for example sake)...use 3k in the first month, before the payment date pay that back with 3k from the other cards, repeat with the 3k on the first set of cards etc etc. As a easier way of accessing credit than say burrowing 3k from a bank?

SnowTiger

robpost wrote: »

Seems like it's much easier to get credit cards over a bank loan, so assuming an individual was sound with money (and their credit status allowed for it) and needed financing of 3k, why not get 6 credit cards (total value 7k for example sake)...use 3k in the first month, before the payment date pay that back with 3k from the other cards, repeat with the 3k on the first set of cards etc etc. As a easier way of accessing credit than say burrowing 3k from a bank?

Most of us have probably thought about that.

The problem is this: how do you pay credit card 'A' with credit card 'B'?

(Generally) you can't use a credit card to pay a credit card bill; and cash advances aren't free.

[Deleted User]

robpost wrote: »

Seems like it's much easier to get credit cards over a bank loan, so assuming an individual was sound with money (and their credit status allowed for it) and needed financing of 3k, why not get 6 credit cards (total value 7k for example sake)...use 3k in the first month, before the payment date pay that back with 3k from the other cards, repeat with the 3k on the first set of cards etc etc. As a easier way of accessing credit than say burrowing 3k from a bank?

Why would you not just BT the debt once to a decent offer?

Or even simpler, get a 0% purchases offer.

Your credit ping pong idea sounds stressful, expensive and fraught with problems.

Also, if you're going to need 6 cards for a measly 7k, you won't be getting any decent rates or offers.

Or 6 cards, come to that.

System

Loans are useful when paying someone who doesn't accept credit cards. E.g. buying a private car.

Ben8282

robpost wrote: »

Seems like it's much easier to get credit cards over a bank loan, so assuming an individual was sound with money (and their credit status allowed for it) and needed financing of 3k, why not get 6 credit cards (total value 7k for example sake)...use 3k in the first month, before the payment date pay that back with 3k from the other cards, repeat with the 3k on the first set of cards etc etc. As a easier way of accessing credit than say burrowing 3k from a bank?

Reading the above I get the impression that the OP believes that all credit cards give a credit limit of £1200 (1200 X 6 = 7200 which fits with the 7K stated).
Unless all 6 cards offered 0% no-fee balance transfers for an indefinite period, this approach would be VERY costly and, in any case, very time consuming.
What is wrong with obtaining an appropriate 0% card (money transfer or purchases as appropriate) with a sufficient credit limit to cover the amount needed?

robpost

Thanks for the responses.

In this context card amount/credit amount doesn't matter too much because what I'm getting at is that credit cards are easier to get than bank loans, so if it could be managed why not consider this as an alternative? Of course a loan or overdraft are both financially better option but what if you can't get those or a card with significant credit limit?

Whilst I'm not saying I'm gonna do this, it is something I'm thinking about if I can't think of a major problem not to.

I'm not interested in balance transfers as that would mean I wouldnt be able to "ping pong" as zx81 put it.

The main reason of doing this would be to cover survival budget whilst setting up a new business a early stage funders tend to frown at money being used for survival.

You would pay the credit cards in group A, with cash withdrawal at 3% of the cards B so every month you will be paying 60 for this to work.

The benefit of this over getting a Loan:
-no payment term times or early repayment dates.
-much easier to acquire than loans of the same amount - if I'm not mistaken
-credit score should increase whilst doing this

This is definitely an alternative method for small financing but there are many situations where people have good credit but will unable to get a bank loan where this might help.

[Deleted User]

robpost wrote: »

You would pay the credit cards in group A, with cash withdrawal at 3% of the cards B so every month you will be paying 60 for this to work.

You would also pay the monthly interest on your cash withdrawals. So another 1-2 % there.

It's not a cheap route and would make your credit history look very poor, to the lenders which would do nothing for your future credit prospects and would result in rate increases.

Even if, as you suggest, Experian think highly of it, they're never going to lend you a penny.

Terry_Towelling

OP, (as pointed out by zx81) does your survival plan factor in the interest that is charged on cash transactions from day 1 regardless of whether you clear the balance or not?

You've forgotten to mention how you would actually clear the debt - rather than simply swapping it from card set A to card set B - and you've perhaps overlooked the fact that you can only use half of your credit because you need one half to pay for the other half.

If your first, £3K was actual spending, you could clear that with cash from card set B and incur about £140 in costs for doing so. If you then make a payment of £140 to card set B (to cover the costs of borrowing on cash) and take £3K cash from card set A to cover the debt on card set B, you will end up with another £140 of costs on card set A.

You can then repeat the process by adding a payment of £140 to cover the costs and using cash withdrawals to repay the original £3K borrowing.

So every month, it costs you £140 to service a £3K debt without it actually reducing in any way at all. That is not good value because you still have a debt to pay and you don't really get much value out of it.

If, however, your plan is to not make any additional payments to cover the costs but simply take enough cash out on the second card set to cover everything on the first card set, your debt will rise exponentially and you will hit your credit limit very quickly.

Unless I've missed something (which I may have) your plans are not going to help you and, if they hint at your approach to business, you may find your new venture doesn't last very long.

robpost

As said before this is alternative solution...also not long term. I have invoices that will will clear the debt after 4 months. Just wanted to know if this is an option when there are no option to get the funds elsewhere...and see if there were anything else I'm missing...but so far the only thing I can see is the 3-5%per month. Not sure how negatively this would affect the credit score as its short term.

robpost

Terry not sure what you mean by whether you mean regardless if the balance is cleared or not. Why would there be interest if the balance is cleared?

[Deleted User]

robpost wrote: »

Not sure how negatively this would affect the credit score as its short term.

Again, not important. No one is interested in the score.

But a repeated history of cash withdrawals, with minimum payments is a red flag to lenders.