0% APR Credit Card to Buy Silver Coins

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0% APR Credit Card to Buy Silver Coins

  • Anonymous

    I shied away from using debt for a long time… I feel that I’m missing some opportunity by doing it, though.

    I think the turnaround in gold and silver is right around the corner, and I want to buy more physical. I’d rather not use all of my saved cash, as I like to have that ready to spring on opportunities in the stock market.

    What are your thoughts on using a 0%APR credit card (which would also give cash back bonuses and points for a large purchase) to buy some silver coins?

    Best,

    James

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  • Liam

    Hello James,

    Please don’t buy gold (or anything) on the margin– or with a credit card. A gold turn around is most likely NOT around the corner. Precious metals are a great investment, but you must be patient. Also, you should not attempt to time the stock market. You should only buy stocks that you think will have long term growth.

    My suggestion is to get your money out of fiat currency and invest in both stocks and precious metals. Don’t wait for a good “buying opportunity”, since neither you nor I are even capable of identifying such a time.

     

    Hope that helps!

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    Anonymous

    Thank you for the response!

    I should have been a bit more clear as I do have the cash to buy to coins as well, I just figured since I’d buy the coins either way, this gives me some more options and allows me to keep my cash. If the price goes up during the 18 months with 0%apr then I turned a profit without having to risk my own capital.

    If it goes down, I have the cash to fulfill my obligation and am confident knowing that the coins will have value in the future.

    Thoughts?

    Thanks again!

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    Liam

    How does it not risk your own capital? You will still owe the original payment regardless of whether it goes up and down. It is very possible that it will go down and you still still have to pay your credit card bill.

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    Anonymous

    Right, but I want to buy coins either way, and have the cash to do so.

    So…

    1. If I use credit instead, and the price goes up I could use profits from the coins to pay back the credit, thus I made a profit without ever using my own capital, and got some coins out of it. Now, if the price goes up in the next 18 months and I decide I want to invest in something else, say stocks, I can use the cash I would have otherwise used for the coins, and I can sell the amount of coins I need to pay back the credit balance. Higher price would mean an opportunity to deploy additional capital into another investment.

    2. If I lose money using credit, I have the cash to pay the difference, and I’m not any worse off because I was going to buy the coins anyway.  The only thing I am losing is the possibility to make more money and create more opportunities.

    That’s basically my logic. Since I am going to buy coins either way, using credit with no financing charges creates the opportunity to have more investment capital, and since I have the cash now to pay for the coins and will have it moving forward, I’m always able to pay off what I owe.

    Also, there is the additional bonus of credit card points and cash back for making a large purchase, effectively this allows me to buy my coins cheaper then I would have without the credit card.

    Thanks again for the response!

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    Liam

    No, you don’t make extra “risk free” money by using your CC.

    For example, say that you bought 5 silver coins for $100 ($20 each) on your CC. Then, let’s pretend like the value went up to $25 each (highly unlikely!). You would have made a $5×5 = $25 profit.

    Now let’s pretend like you bought 5 silver coins for $100 ($20 each) with cash. Then, let’s pretend like the value went up to $25 each (highly unlikely!). You would have made a $5×5 = $25 profit.

    As you can see, it’s the same thing! The ONLY way you could make more money is if you spend all your cash and use your credit card, and if it goes up you will then you will double your profits (assuming you match your cash investment with credit) but if it goes down you double your losses– which is certainly not risk free.

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      Liam

      Also I should add that the premiums put on gold coins and shipping and storage fees make it much harder to make a profit.

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      John Jones

      Risk Free was not the right term.

      He is describing the prudent use of leverage, which is very very common all over Wall Street (leverage that is, not the prudent use of it).

      If he buys the $100 on credit and silver goes to $25, he may then feel more comfortable using his cash to buy $100 more as he now has a margin of error (his $25 profit on the original buy). He could set a floor sell price on all the silver at that point to lock in a profit or breakeven.

      Buying the original silver on credit allowed him to leverage his investment after the price rise, simple as that.

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      Anonymous

      You’re right, I used incorrect wording. Thank you!

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      Liam

      That is assuming that it goes up in the first place, then all you are doing is increasing your risk.

      You could similarly do it in the reverse order i.e. buy coins with cash, then once the price rises to $25, buy more via credit.

      If you are completely sure that silver will go up in the next few months, by all means go into debt to buy it, but I would just stick to the fundamentals and use cash to take a long position.

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      John Jones

      To each his or her own. Everybody has an opinion.

      You apparently have the opinion that you should never use any leverage in investing as well as the opinion that a 25% move up in silver is highly unlikely. I disagree with both of those opinions. That is the free market.

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      Liam

      I am not of the opinion that one should NEVER use leverage. I just want James to realize that it increases the risk of his investment.

      I actually have thousands of dollars in silver and I do expect a huge increase sometime in the future, but I am not going to make a time sensitive investment based on that assumption. It could happen at any time and there is really no way to tell when.

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      John Jones

      I think we are both trying to give sound advice. I have always been out of the box in my investment thinking. Just trying to give him a guideline for using the credit since he seems to want to and he has the cash to cover it.

      I feel very confident that we are all right about the long term for silver and I agree that the timing is the real unknowable. I posted an earlier response detailing this, but it never made it to the site. Oh well.

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    Anonymous

    Right on Liam, thank you for the advice!

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