Arbitrage 01: Making Money From Credit Cards

Please note -- Posts in my Arbitrage series describe one way a person can profit from differences in interest rates. I do not guarantee that anyone will be successful doing it. I am not a financial advisor. I'm merely a hobbiest. As with any program, there are risks that you need to evaluate for yourself. Things can go wrong. You could lose money. If you try this and it doesn't work out for you, I am not responsible. There may even be an error or two in these posts that I haven't caught yet. In short, please don't sue me.

Credit Card companies constantly poach one another's business with Balance Transfer offers. If you have a credit card, or an address, or maybe once smelled a credit card, you get these offers in the mail.

If the Balance Transfer is for 0%, you can make some money with it.

When I get a 0% Balance Transfer Offer on a credit card, I take it. I love it when the credit card company let's me play with their money for free. I stick it in a savings account and make more than 4% interest on their cash. In two years, I made $2300 using this strategy.

How to make Money from Credit Card Offers:

  1. Receive a Balance Transfer offer for 0%.
  2. Check the fee. They usually have a Balance Transfer fee of 3%, with a maximum fee of $75-$90. If there is no maximum fee (read the fine print) shred the offer, and return to your normal viewing.
  3. Check your outstanding balance on the card. If it's anything other than $0, shred the offer and return to your normal viewing.
  4. Check your credit limit on that card. If it's too low call the credit card company and ask them to raise your limit. How low is too low? That's up to you, but I wouldn't take the offer unless I have at least an $8,000 credit line on the card. If they won't raise your limit, or you don't want to ask them to, shred the offer and return to you normal viewing.
  5. Check your credit limit on the card. If you have a large credit line already, you may want to see if they can raise it event more.
  6. Check the Balance Transfer check to make sure you still get the 0% rate if you deposit it in your checking account. If not, read a future post on funneling the cash through another account. Or shred the offer and return to your regular viewing.
  7. Check the expiration of the Balance Transfer offer. Call the company if you aren't certain. This is very important.
  8. Deposit nearly your entire credit line in your checking account. Leave $100-$500 of available credit on the card in case something weird happens.
  9. Once your deposit clears, transfer the money to a high interest savings account. Ingdirect, HSBCDirect and EmmigrantDirect are all great choices.
  10. Schedule a monthly transfer for the minimum payment (usually 2-3% of the balance) from the online savings account to your checking account.

  11. Make the minimum payment to your credit card one week before the due date.
  13. Pay all of your other bills on time. This is critical. This is one of the potential pitfalls.
  14. Two weeks before the offer expires, transfer the remaining amount from your savings account to your checking account.
  15. Make sure the payment arrives at the credit card company one week before the program expires.

Congratulations, you have now made several hundred dollars in interest that is now earning even more interest in your savings account and you owe the credit card nothing.


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