Canada @lemmy.ca ChocoboRocket @lemmy.world 3mo ago

parents scammed out of 10K line of credit - best way to pay it off

So my parents got scammed last night, fraud case is open but it's likely not gonna go anywhere and they'll be out 10K - they know better and now they really know better, and I'm hoping to get some advice on a repayment strategy.

They absolutely don't have that kind of money and repayment will take a while.

Plan one is just put it on the mortgage, but they're currently locked in at a lower rate for 2 more years, so adjusting that isn't ideal if it changes the rate. If not, adding 10K to mortgage is no brainer.

Line of credit does carry lower interests, but it will accrue daily, credit cards are high interest, but interest is racked up monthly.

Would it be possible/smart (assuming +10K credit card capacity) to move LoC debt to the credit card for 25 ish days a month to avoid daily LoC interest, and then send the debt back to LoC for 5ish days (transfer time) and have the credit card at $0 at the end of every month? No credit card interest and far less days for LoC debt to accrue interest?

Obviously there is risk in not having the credit card paid off in time, but would this strategy be viable if properly executed?

10 comments

I get what you're trying to do moving the money back and forth. I seems to me it's awfully close to kiting - a concept my branch manager explained to me when I was 17 and thought I'd found a loop hole. Be careful; getting busted is no fun even when it's a scolding. https://en.wikipedia.org/wiki/Check_kiting
- If writing a check with insufficient funds is done with the expectation they will be covered by payday it is called playing the float
  
  Heh, I'd bet that many people do this, though not with checks per se.
  
  I...err...a friend, up until last year when they changed how it worked, used to do this with the PayPal debit card. All transactions would take 3 business days to actually pull the money out of the bank account. So if you needed to pay a bill or whatever on either Tuesday, Wednesday or Thursday but you don't get paid until Friday you could use the PayPal debit card on any of those days.
  
  Then the bastards changed it after like 10 years so that you could only use the debit card with settled funds in the PayPal account, which made it utterly useless because that same 3 days applied to transfer money into your PayPal account so you needed to transfer money into PayPal 3 days ahead of when you wanted to use it.
  
  What a shame though because even if you had the money in your bank account for a purchase the PP debit card was still nice to use because it offered a 1% cash back on a debit card
  
  Ofc the whole thing was probably a scheme to get people to keep money on their PayPal account (Which you should never ever do).
  
  @cm0002 @pubquiz kind of reminds me of the old days where some places would let you post-date a check, and they would wait until that day to deposit (a couple days usually)
- Yeah, it's pretty much the idea of kiting but without intention for scamming/lying - just hoping to take advantage of the difference in how interest is applied to debt without breaking the law.
  
  Considering there is still risk involved (bank/CC get paid either way, and miss timing the transaction results in interest payments to them) its more of a risk tolerance approach than scam/fraud, but I don't doubt the Bank's diligence in protecting their assets.
  
  Hopefully they can do a debt consolidation, and get a better rate, but with interest rates where they are I am not sure it would be much better than line of credit
You would be far better off speaking to one of those debt consolidation places than trying to juggle it around like that. I'm not sure where you are located, but hopefully there is one that can help.
- Yes, speak to a pro. Hiring someone to advise you will save you more than the they cost, especially if you value your time.
Typically when you are moving debt to a credit card, you are not making a purchase, but are withdrawing cash from the credit account to pay for the LOC. A cash advance usually means you are paying interest on the amount withdrawn immediately at super high credit card rates. There is usually no grace period given for cash advances. IIRC, the cash balance is tracked separately from your regular card balance, and payments first go to paying off the normal monthly balance, and when that hits zero, they go towards the cash advance balance. That keeps you paying high interest for longer if you can't pay it off in full. You'd have to read your terms of service to confirm how your card handles this. Be careful to make sure you understand your terms.

There are frequently special balance transfer offerings issued by card companies that allow you to transfer your credit balance from one card to another for a fixed initial cost (3% of balance seems normal now), and then you get up to 12 months at 0% interest. That can be a pretty good deal, but you would have to confirm if you could do a cash advance on one card, then balance transfer to a second one using a promotional offer and make sure the second card doesn't still treat it as a cash advance balance, which would likely be subject to immediate high interest rates. This is probably the most likely scenario. However, if you can confirm they treat the transferred balance as normal, it would end up being cheaper than a year at LOC interest. Then you pay it off in full with the LOC and repeat, assuming you get another offer. I think it is more likely banks will look out for each other and that won't work for cash advance credit card debt, but hey, maybe there are banks that just want your business and only a little cash instead of a lot.
- I figured there might be something along the lines of being limited to purchases and anything used to service debt would become cash in the eyes of CC company, which does have significantly worse terms
  
  Thank you for the insight!
The cheapest place to get a ~1-2 year loan would most likely be:

Credit transfer promo at 0%(they get you with the transfer fee usually 2% these days.) and 6m terms.

HELOC assuming they have equity for that.

Shopping around for LoC's. Some places have way higher rates then others. For example my Scotia LoC used to be like 30k at 6.5% and TD was 11k at 11.75%. Also keep in mind that each LoC will most likely require credit checks.
Not sure if this applicable in Canada, but in US you can take a loan backed by home equity. It's called HELOC and is independent from your mortgage - it will not change interest rates. The rates on HELOC are higher than current mortgage rates, but lower than credit card rates. The available amount depends on how much equity you have in your house.

10 comments