I recently got a mailer advertising a free computer from www.4mynotebook.com. The company advertises it as an upfront reward and says there is no purchases and no waiting required. I like to calculate these deals out and see how much the computer actually costs, so lets look at the fine print.
You have to transfer $5000 of debt to the card adn maintain a balance of $3,500 for at least 18 months, so lets assume that you transfer $5000 and immediately pay the balance down to $3,500. At 9.99% APR interest rate, you’ll end up paying $524.48 in interest over the next 18 months.
That isn’t so bad. Assuming that the laptop is worth about $600 this may even be a good deal. But wait, according to the fine print, the interest rate is variable, so it can change. It gets a little complicated but it looks like once you sign up the interest rate goes to Prime + 2.24% or stays at 9.99% (whichever is greater). After December they add 3.74% to Prime. Prime is expected to be around 8.50%, so that means we’ll be paying 10.74% until December and 12.24% after that.
So from June to December (7 months), we’ll pay $219 in interest. For the remaining 11 months we’ll pay $467 for a total of $686. Prime could go up quite a bit and that would make the payment much higher. Personally I’m not very comfortable with the risk of the interest jumping up and making the laptop end up costing over $1000.
The final thing to consider is the actual value of the laptop. The best I can tell, the laptop would cost $499 plus $24 in shipping right now from Dell. So the cost would be $523. The cost of the laptop is going to be at least $163 than it would be if you bought it directly from Dell.
However, if you already have debt on a variable rate credit card, and you’re getting ready to buy a lowend laptop using that credit card, it is possible that this might work out to be a good deal.
However for most people this is just a way for the credit card company to suck in a bunch of people and start them out with large a large balance.
There is one further trick you can use to bring down the cost of the interest you pay. The card lets you take up to $2,500 out as a cash withdrawl. If this is at the same rate as the rest of the balance (you’d have to call them because it is unclear from the information they give), you could take the cash and put it in an account earning 4% interest you’ll be able to earn $150 over the 18 month period. If you have an account that earns 4.75% you can earn $178 over the 18 months. (I’ve seen accounts advertized with this interest rate that don’t require extremely large inital deposits.) In this scenario you might be able to come out ahead by $15.
Personally I think it is likely that interest rates will go up enough over the next 18 months to make this a bad deal, but it doesn’t look quite as bad as some of the other “free” laptops deals I’ve seen.
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