Announcing the latest in financial engineering: The all-new short-term revolving-loan-financed margin trading account
A little break from Russia's economic crisis and adventures in Syria...
I called one of my credit cards for some routine matter. Before letting me go, the company's representative on the phone made a pitch, evidently reading from some kind of script or talking points.
It went as follows:
Phone rep: Thanks again so much for your business. I notice your available credit (amount one can spend on the card) is quite high. We're offering a special where you can get a cash transfer direct to your bank account, zero interest for 13 months. I know a lot of our customers have been calling in and using that to pay taxes or make investments.
Me: Oh yeah? What's the interest on that?
Phone rep: Well, it's zero interest for thirteen months. It's a really great offer we're able to make. Also there's a four percent transaction fee, minimum of ten dollars.
Me: OK, and after that?
Phone rep: Well that would be 14.35 percent annually. But you can pay if off within 13 months and not pay any interest. It's a great way that a lot of customers have been using to pay taxes or make investments.
Me: So basically, my investment that I'm funding with your money... If I want to pay you in full after 13 months plus let's say one year, paying just interest during that year... Given your transaction fee, I'd have to find something that returns 18.35 percent within 25 months just to break even. I dunno. Thanks anyway.
Comment: Wise words.