Just Put the Condo on My American Express

Filed in archive Buying Stuff , Credit , Real Estate on September 13, 2006

A new condominium called The Atelier, on West 42nd in New York City, is accepting American Express for down-payments.

Based on the info in this article, these condos, which are still being built, are between 550 and 1,200 square feet, pricing at about $1,000 per square foot.

Based on my calculations, that means they will cost between $550,000 and $1.2 million. I don't know the NYC real estate market at all, but I'm guessing a down payment still has to be at least 5%, which means that at even the lowest end, putting your down payment on your American Express card equals a $27,500 charge. (At the high end, we're talking $60,000.)

Now I suppose if I'm even considering paying a million dollars for 1,000 square feet, putting $50,000 on my credit card isn't a big deal. And, hey, the 50,000 Membership Rewards points you get are worth at least $500 for your trouble.

This isn't really a big deal. You're dealing mostly with people that have a lot of money here. I can't imagine too many are going to revolve that $50,000 balance. Most would probably do it for the rewards and pay it off immediately. (At least that's what I'd do given the opportunity.)

But it does make you wonder if it's the beginning of a slippery slope, one in which eventually people with lesser means will be taking out mortgages based on down payments that come from their credit cards. That would be an invitation for disaster. Now, of course, most mortgage companies wouldn't touch a person who's basing their purchase off of a credit card-fueled down payment, but... some companies undoubtedly would, and some people would no doubt accept the invitation to upgrade without having to come up with any upfront cash to do so.

I have no problem with credit cards, or I wouldn't have spent so much of my working life in the industry. I think responsible people can benefit from them, and I think even people of lesser means can benefit from having them as a lifeline if things get really rough. But I'm also aware that some people are plain stupid, and giving them credit is plain stupid, and some of them will end up stupid bankrupt due to the combined stupidity of they themselves and the idiots who kept giving them credit long after they'd proven they couldn't handle it.

Taking credit cards for down payments from the rich--fine. But let's stop it right there.