Wednesday, October 1, 2008

If the banks are short of cash to lend why. . .

If the banks are so short of cash to lend why have I continued to ger the usual mailings offering cheap credit over the past couple of weeks?

One bank sent me a letter saying we're pre-qualified for a second morgage of up to $150,000 at a 4.5% rate which can't be adjusted for two years. Several others have sent me their usual envelopes of pre-printed checks offering loans at zero interest for the next six months. One offered to double the limit on our present credit card with them, and offered to guarantee an interest rate of 4.9% for the life of the loan if it's used to pay off another credit card. Reading them carefully, as I always do, I find, that most of the loans are not really at zero interest because there is a 3% processing charge up front, but one of them offered the old sweet deal of a flat maximum $75 up front processing charge.

Are these offers the last trumpetings of rampaging brain shot elephants? Are they the last reflexive tail twitchings of headless snakes?

I'm looking at an offer of up to $30,000 that just came yesterday, a day after congress failed to pass the bailout bill that the banks supposedly need to keep the financial system from collapsing. It's from Capital One, which proclaims that "As of 09/23/08, our records show you've earned this offer for a 0% APR on balance transfers and 0% APR on purchases until January 2010." Capital One is one of the greedy ones that charge 3% up front, so I'll probably throw their offer away eventually; but then again maybe I'll save it for a few days against the possibility that I don't get a better offer and the stock market really tanks, tanks to a level which makes it irresistible. After all, somebody has to patriotically support the market when the whole world is fully in insane panic mode and well run companies in recession resistant industries are selling for five or eight times solid earnings. Just for comparison the S&P average is now at about 20 times trailing earnings.

Sometimes the banks make kiting credit so cheap that it makes sense; but don't even think about trying this at home unless you're very disciplined about promptly paying the minimum amount monthly, and you also have another safety valve line of credit available in the event the mail gets lost or something else like that. This is a game that needs both a belt and suspenders because such offers always carry the threat of reverting to something like Capital One's 24.9% rate if you miss or are late with two payments.


Anonymous said...

I was thinking the same thing myself...that if credit is so tight, then why do they keep sending me offers to transfer balances and/or checks.

There was one account that wanted to raise my credit limit. I called them and said that instead of increasing my limit, that I would prefer they lowered my rate. They agreed and cut the interest rate by half.


Sully said...

Interesting. I rarely run a balance month to month and I already have a low rate on the card I use for almost everything. But your success at getting a cut in rate is intriguing. I may try calling and talking to them.