"Money Laundering" How to?

[A1CSpence]

So here's the deal. I'm trying to start a Roth IRA with Vanguard. I've got a credit card with a $3,000 limit and $0 balance which has its interest rate locked at 6% (thank you soldier's and sailor's civil relief act). I called them to request "convenience checks" to pay Vanguard to start my account. They denied my request and said they don't just give convenience checks away by request. So what I would like to do is find some intermediary, perhaps another bank, which will accept a deposit via credit card. Then I can transfer the money to Vanguard and start my IRA. Anybody have any ideas?

 

[MercenaryForHire]

IBTFBI

- M4H

 

[pulse8]

Any deposit you take out of your card would be a cash advance and the interest rate would be higher.

Also, this isn't money laundering.

 

[Crucial]

paypal? you will lose some on fees but it's doable and it wont be a cash advance

 

[Zolty]

Only way I can think of is to paypal someone the money, but you take a hit. You might try google checkout that might work with out any fees.

 

[IceBergSLiM]

Originally posted by: pulse8
Any deposit you take out of your card would be a cash advance and the interest rate would be higher.

Also, this isn't money laundering.

 

[clamum]

Cue Office Space reference.

 

[akubi]

not to mention what keeping that pathetic limit maxed out all the time would do to your credit scores, lol

 

[A1CSpence]

My cash advance interest rate is the same as my purchase interest rate. That's probably why they don't want to send me the checks. They'd be giving me a $3,000 loan @ 6% interest. I thought about paypal but that would eat into 6% of my money, too high of a price to pay.

 

[Genx87]

Originally posted by: A1CSpence
So here's the deal. I'm trying to start a Roth IRA with Vanguard. I've got a credit card with a $3,000 limit and $0 balance which has its interest rate locked at 6% (thank you soldier's and sailor's civil relief act). I called them to request "convenience checks" to pay Vanguard to start my account. They denied my request and said they don't just give convenience checks away by request. So what I would like to do is find some intermediary, perhaps another bank, which will accept a deposit via credit card. Then I can transfer the money to Vanguard and start my IRA. Anybody have any ideas?

Yes money laundering is a wise way to start off your investments for retirement lol
Where do you people come up with this crap?

Best idea IMO is to save the money. What possible reason could you come up with to use a high interest rate loan like a CC to start an investment account?

 

[Mr Incognito]

Originally posted by: clamum
Cue Office Space reference.

Beat me to it.

 

[A1CSpence]

The interest rate is 6%. If my retirement account earns 10% a year, wouldn't it be economically reasonable to borrow money at 6% and then make 10% on it?

 

[dullard]

I cannot forsee this going well. You are basically buying stocks on margin (borrowing money to buy stocks). This dramatically increases your risk. High risk and retirement accounts are not usually considered a good pairing.

Lets do the math. Suppose that $3000 is locked in at 6% interest for 40 years. Suppose you got a typical stock market return of 10%/year for 40 years. When you withdraw that money, it'll be worth $14,403. But, due to inflation (assumed to be 3.3%), it really is only worth $3930 in todays dollars.

Basically, you are creating a very risky situation, possibly harming your credit score, hindering your ability to borrow money in the future, all for a measly $930 that you might get in 40 years.

 

[A1CSpence]

I planned on paying off the $3000 balance as soon as I could...

 

[BrunoPuntzJones]

You guys must have never followed the US savings bond threads over at FatWallet several years back.

0% credit cards for 1 year, and you could buy bonds with credit cards. No brainer. Buy a $50,000 bond on your card, make a few bucks.

Granted it didn't take long for the card issuers to catch on and the treasury stopped accepting credit cards as a method of purchasing.

And there was a bit more to it, but that's a quick summary.

 

[dullard]

Originally posted by: A1CSpence
I planned on paying off the $3000 balance as soon as I could...

When you get that $3000 start your IRA. You therefore have no reason to borrow money.

 

[Alone]

Lol.

 

[A1CSpence]

Isn't time a significant factor in investment growth?

 

[PaNsyBoy8]

Originally posted by: A1CSpence
Isn't time a significant factor in investment growth?

How much time are you talking about here? How long will it take you to save up that $3k? If its a few months, I don't think that 3K will net you that much.

 

[zerocool1]

Originally posted by: A1CSpence
The interest rate is 6%. If my retirement account earns 10% a year, wouldn't it be economically reasonable to borrow money at 6% and then make 10% on it?

that depends on how often each account is compounded

 

[kami333]

Don't do this with a 6% card. There are a lot of 0% cards out there that would make this better. Google "balance transfer arbitrage".

Personally I would recommend opening a Citi account and funding it with a credit card, I pulled some money (a couple thousand) out of my Chase card that way and it showed up as a purchase, so did everybody else who did. I don't think they have a limit, BoA and a couple other banks do to but they have limits.

Another way would be to use Google Checkout, not exactly kosher but it can work.

 

[A1CSpence]

I appreciate the responses. Let's just assume that I am definitely going to do it no matter how asinine it may seem. The question is how?

 

[moshquerade]

Originally posted by: MercenaryForHire
IBTFBI

- M4H

:laugh:

 

[KK]

Yeah, go with a balance transfer card with 0%, I believe citi or chase will cut you a check for the transfer. Also try and find one without a balance transfer fee.

 

[dullard]

Originally posted by: A1CSpence
Isn't time a significant factor in investment growth?

Yes, time is a significant factor. But so is (1) the cost of money and (2) statistical distributions.

It costs you 6% to borrow that $3000. Suppose you could do what you plan and get 10% return each year. Case 1: borrow the $3000 now, pay it off in full in one year, and have $3120 invested ($300 stock gain minus $180 CC interest = $120 net gain). Case 2: invest that $3000 a year from now. In 40 years, case 1 will have $128k and case 2 will have $123k. There is a minor difference. Borrowing money now would be $4937 better ($1347 in inflation adjusted money). So, yes, in this simplistic case, you would be slightly better off to borrow that money for a year. Paying the CC off sooner, is better than paying it off later.

But what about statistics? Stocks don't return 10% a year each and every year. Lets assume they return 10% for the last 39 years and see what happens if this first year is more volitile. What happens if you get a 5% return in the first year (because stocks are near all time highs, corporate profits are falling, housing is doing worse, the GDP is getting worse, and inflation is getting worse). Borrow money: $122k at end. Don't borrow money: $123k at end. You LOSE $1234 if this happens.

What about other results?
[*]If stocks fall 5% first year: Lose $13,577 by borrowing for one year.
[*]If stocks fall 3% first year: Lose $11,109 by borrowing for one year.
[*]If stocks fall 1% first year: Lose $8,640 by borrowing for one year.
[*]If stocks rise 1% first year: Lose $6,172 by borrowing for one year.
[*]If stocks rise 3% first year: Lose $3,703 by borrowing for one year.
[*]If stocks rise 5% first year: Lose $1,234 by borrowing for one year.
[*]If stocks rise 7% first year: Gain $1,234 by borrowing for one year.
[*]If stocks rise 9% first year: Gain $3,703 by borrowing for one year.
[*]If stocks rise 11% first year: Gain $6,172 by borrowing for one year.
[*]If stocks rise 13% first year: Gain $8,640 by borrowing for one year.
[*]If stocks rise 15% first year: Gain $11,109 by borrowing for one year.

So, are you willing to risk losing $11,109 to potentially gain $11,109?