discover no interest checks

 hello, we're thinking of taking out a small home equity loan to finance
some landscape work for our house this year.  however, i just received
a few checks from discover that claims to offer free interest til apr
05.  they would continue the free interest offer after apr 05 so long
as you charge at least $50/mo on the credit card.  there is a 3% (up to
max $50) up front charge but that seems nominal if you plan to borrow
several thousand.  anyone using this offer or had any thoughts on the
matter?

thanks

 
The main catch here is that payments are applied to the balances at the
lowest interest rate first.  Thus an increasingly larger percentage of the
remaining balance will be at your standard interest rate every month.

Assuming you don't use the card at all except for your required $50/mo, and
assuming a standard interest rate of 16% (just a guess) by this time next
year you'll have a $500 balance at the regular rate and will have paid $37
in interest.  By 1/2007 that will be a $1100 balance and $169 in total
interest; by 1/2009 $2300 and $721 total interest.

The more you borrow, and the quicker you pay it off the better the deal.
You'd have to run the numbers based on your specific plans to see whether
it really makes sense.  Note that the home equity loan's interest will
probably be tax-deductible so its true cost is probably ~80-90% of the
actual dollar amount.

The deal quickly starts getting worse if you use the account for more than
the required $50/mo.  To get anything out of 0% offers you cannot use the
account for *anything* else.

Another catch is that a single late payment, to Discover or anyone else on
your credit report, may be enough to jack the 0% up to the standard rate,
or even higher.

As such things go, this isn't a very good offer.  If your credit is good
you should be able to get 12 months at 0% with no transaction fee on a
separate account with no purchase requirements.  Discover may be willing to
sweeten their offer this much, but if not one of their competitors will.
--
Jim Prescott - Computing and Networking Group    jgp@seas.rochester.edu
School of Engineering and Applied Sciences, University of Rochester, NY

 On 5 Jan 2005 19:13:08 -0500, jgp@harn.ceas.rochester.edu (Jim
Prescott) wrote:


Your logic escapes me.  If the OP takes out the Discover card to pay
for this landscaping work at 0% interest and starting in April 05
continues to make not only the minimum payments on the original charge
but also charges the minimum $50 in new charges every month, what
interest is the OP paying if s/he is following the rules to maintain
the 0% interest?  There is no interest involved, only the project
loan's minimum balance plus the $50+ in new charges every month.

Your other points are well taken, but don't address the essential
point, which is that the OP theoretically can maintain a running loan
with Discover at 0% interest.

 i wonder if it's only the initial charge that is interest free and ALL
payments towards discover go to that initial charge until it's paid off
(thus the $50/mo sustanance fee starts to accumulate with interest
until the entire initial balance is paid off)

 KLS wrote:

Only on the original amount. But on the mounting balance created by the $50
charges the person will be racking up $$ with whatever the interest rate is
since any money put on the card will only take off from the 0% balance first.