Yesterday Suze Orman had a segment dedicated to App-o-ramas, so out of curiosity, I tuned in to find out what she had to say. I must admit, it was entertaining for all the wrong reasons. I was amazed at the number of factual errors an 8 minute segment could contain. For fun, I’ve run down each of her points as she tries to warn viewers away from pursuing the strategy.
Suze: To qualify for 0% offers, you must have a FICO score of 760-850.
This is patently false, as there is no such hard line. Of course you’re more likely to qualify for these offers if you have an excellent score, but plenty of people with lower scores can and have received 0% credit. Should you bother to try if you have a 500 credit score? Probably not. But as long as you can afford the short-term ding to your credit from the inquiries, what do you have to lose? If you don’t get a 0% offer after applying, and instead get a higher rate offer, you can always say no.
Suze: You need to use a cash advance, which usually has a 21% interest rate.
Huh? She lost me there. If you’re paying cash advance fees in an app-o-rama, you’re doing something seriously wrong.
Suze: Balance transfer fees used to be $75 flat fee, regardless of how much was transferred. Now, they’re a minimum of $75, up to 2%-3% of the transferred amount.
Where to begin? Her characterization of balance transfer fees both before and after issuers “wised up” are inaccurate. There are literally hundreds of offers listed in our offers database with a minimum balance transfer fee of $5-$10 and a maximum of $75. There are also still some without any fees at all.
Suze: You must pay taxes on your savings account interest, and you must make minimum payments on the amount you’ve borrowed, so you’re earning less interest than you think.
For once, she’s gotten something (partially) right, but no one has ever argued that this isn’t the case. When calculating your profits you should of course consider that you’ll need to pay taxes and minimum payments. What she neglects to mention are how signup bonuses can also significantly boost your effective return.
Suze: 0% is not fixed. The credit card companies can change your interest rate at any time they want.
Another extremely misleading statement. Yes, the credit card companies can jack your rate if you’re late on a payment, but they won’t go about raising your rate just because they feel like it, and certainly not without warning. If you’re not responsible and organized, and think you might miss a payment, you shouldn’t be playing the game.
It should be noted that I have absolutely nothing against Suze Orman. To be honest, if I was giving advice to her target demographic, I also would advise against trying an app-o-rama. The problem is that her arguments were littered with factual errors and scare tactics. There are many legitimate reasons to avoid an app-o-rama; it’s a shame that her staff couldn’t be bothered to do the research to identify them.
