Comments on: Say No To Credit Card 0% Balance Transfer Arbitrage

By: AlwaysAThrill

AlwaysAThrill — Fri, 31 Jul 2009 07:20:02 +0000

it is pretty much a one time deal – harder and harder to find cards – even if you close account they just want to reopen old accounts in a year or so – can keep it going decent for about two years – so if you do it – do it big. One rule NEVER SPEND THE MONEY

By: AlwaysAThrill

AlwaysAThrill — Fri, 31 Jul 2009 07:15:57 +0000

Man – people are just so stupid – what is so hard to figure out – I did this 8 years ago (just figured it out) – borrow money for free – invest in FDIC insured money market accounts and take the profit. Simple. Borrowed 200K = made 10K for the year – if you are going to do it do it big – have told many people but most are sheep who think”its too good to be true” but thank god for all the lemmings out there who spend the money – otherwise these offers would not exist.

By: Devil's Sidekick

Devil's Sidekick — Wed, 11 Feb 2009 04:02:06 +0000

One more reason not to do it: Miss out on credit cards that feature rewards… 1% on anything and 2% additional on three categories is pretty decent. Sure, you have to wait until you reach 50 bucks. But if you spend 10,000 a year on a card, that’s at least $100 a year at least. (with a max on mine of $144/yr on the 2%) $244 is 2.44%. Not bad, especially these days of ultra-low interest.

You never have to ‘fill’ your available credit, just pay at the end of the month. And there’s only one account to deal with. (And they don’t file it as income with the IRS)

Added to the Credit ding, and so on… I find this sound advice.

Out of curiosity… Is it repeatable? Do you still get 0% offers after you do this?

By: Kevin

Kevin — Wed, 27 Jun 2007 00:34:01 +0000

I did one of these 0% balance transfers with Discover and am feeling the pain. It was nice for a while – earning the 5.05 interest and all, but then my auto insurance policy came. It said I wasn’t getting the lowest rate possible because of my insurance score. (Oh no, not another score!). Well, Equifax provided this score to my insurance company and my rate went up. I am not sure what my score was before, but when I used 7500 of my 8000 credit line, my lowest credit score was 753. So, just think twice if you do one of these. As soon as I heard about the rate hike, I paid back the balance, but my credit score has not rebounded.

By: Maria

Maria — Tue, 26 Jun 2007 03:40:11 +0000

Hi!

I’ve been reading for hours financial blogs and advice. Up until a few months ago, I was mostly financially illiterant. (So much so that when I got a credit card, I was simply ‘thrilled’ that the ’store’ said the application was ‘approved’…not knowing that meant a 22% interest rate…and had I known, I’d not have paid any attention to that figure, hehehe.) I have only just begun to learn and I’m not even in my 20’s or 30’s! Your entry is exceptionally interesting. Do you have a financial blog?

By: Also Not Impressed

Also Not Impressed — Mon, 25 Jun 2007 20:25:46 +0000

Re: CPA1298

You really didn’t “do the 0% thing,” what you really did was borrow $30K on a credit card to make a down payment on a house and put money in your IRA.

Are you really surprised that didn’t work out well? You should feel lucky they let you have the mortgage, they should have denied you with that much pending debt.

By: Anon

Anon — Sun, 25 Mar 2007 05:04:49 +0000

For those living in high income tax states consider muni bond funds from the likes of Vanguard and Fidelity. For me in California, the Fidelity California Muni Bond Fund has a tax-equivalent yield of 6%.

By: NR

NR — Fri, 23 Mar 2007 15:34:18 +0000

While I understand the concerns raised by others, I found this to be a very profitable exercise. During the spring of 2006, I applied for 10 zero percent balance transfer cards using both mine and my wife as separate applicants. I then borrowed the maximum allowed on each card using each card’s balance transfer option. In total, I borrowed roughly $140k. I incurred either a zero balance transfer fee or . I then put the borrowed money into UGMA accounts at an online bank, one account for each of my two teenagers.

I am just now paying off each of the cards since the end of the 12 month window is closing. Even when paying the minimal balance transfer fees of no more than $29 or $75 (nothing in most cases), I earned a return of roughly 5% or over $7,000 over the year and the interest was taxable at my kid’s tax rate. The earned interest will remain in their account to assist in the purchase of their first car when they graduate from college in several years.

Was the effort to initially set up all of this activity and pay 10 credit card bills worth it? Definitely!

By: GaryP

GaryP — Tue, 13 Mar 2007 22:29:54 +0000

Bruce, you are right. 25% bracket does not start until income of about $87k for a family of 4 using the standard deductions and exemptions. 15% would start at $40k, and 10% at $25k.

So right now I am only in the 15% bracket for any additional income I bring in from 0%BT but I would still like to keep that in my pocket and not send it to Uncle Sam. And I am also doing everything I can to get my income up to that 25% bracket yet find deductions to only have to pay 15%

By: Bruce Davis

Bruce Davis — Tue, 13 Mar 2007 13:44:55 +0000

Few middle class people pay 25% of the income from Credit Card Conv Check (0% offers) in taxes. Have you heard of the personal exemption and deductions. I pay close to 10% of my income from these offers in taxes.

By: GaryP

GaryP — Sat, 10 Mar 2007 18:16:37 +0000

Any money you get from 0% BT arbitrage must be put in a safe, high-yeild investment. If you use if to put a downpayment on a house, pay off a car, or buy furniture then you are not doing 0% BT arbitrage but instead are doing exactly what the credit card company hopes.

I have considered paying off my car, but what will I do in 12 months when the money comes due? No, I would rather sleep at night and have my 0% money earning 5%.

I just did my App-o-Rama. I applied for 24 credit cards. Before my App-o-Rama my FAKO credit scores from TrueCredit.com was:
TU777 Ex762 Eq736
After 26 hard inquiries hit, my credit scores are now:
TU766 Ex742 Eq706
I will discuss some of the details of the credit score hit on my next post in my blog.

I am trying to figure out if this can be a business. Then any BT fees and the interest would be tax deductible on Schedule C. To that end I have opened up a seperate checking account at my credit union where I can keep track of expenses.

By: Blaine Moore (First Time Home Owner)

Blaine Moore (First Time Home Owner) — Tue, 27 Feb 2007 14:40:13 +0000

CPA, I think that the real trick with these arbitrage games is that you keep all of the funds liquid or at least available before the amount is due through certificates of deposit. I do not think that they are worth the risk to begin with (as stated above) but they are certainly not worth the risk if you increase that risk by not keeping that money available on short notice. The margins are small enough now that they'll be eaten up and wasted as soon as you start paying interest. If you are near or past when the interest charges come, you should look into transferring those balances to a new 0% offer to give yourself another year or so to pay them off. Nickel has a list of 0% balance transfer offers available that he published this morning.

By: CPA1298

CPA1298 — Sun, 25 Feb 2007 19:22:56 +0000

I’ve done the 0% thing, and I have to say I wasn’t happy. I borrowed a total of about $30k, $14k of which went into Roth IRAs and $16k went into Emigrant. My situation was a little unusual, as I had a house sale coming up (I was planning on renting), and my wife was going to transition from being a pharmacy student to a pharmacist ($96k/yr). Obviously, I didn’t think liquidity was going to be a problem, and that I was sticking it to the banks.

Well, after our move we found a house we really liked, in a perfect neighborhood for sale by owner, $13k less than appraised. So, we bought it with 20% down. There went most of the liquidity to pay off the cards; after buying furniture the rest was gone. So, for the last 6 months we’ve had our back to the wall getting these 0% cards off our back. I’m pretty decent with finance, and my wife is blissfully naive. We’ve been sinking a tremendous amount of monthly cash into paying these things off; we currently owe $11,500 to Chase.

Oh, not least, my credit score dropped 100 points; 780 to 680. That was painful. As I mentioned before, we bought a house….I felt pretty stupid with the loan officer interrogating me about all the cards/balances on my report, and I’m mumbling some stupid crap about 0% and free money. She wasn’t impressed.

I don’t think this is a Devil’s Advocate post; I think is it the truth.

By: My Financial Journey

My Financial Journey — Sat, 24 Feb 2007 13:24:59 +0000

Wow $30+ a month I think you just finally sold me What have I been waiting for? I think Blaine brought up good points about the fact that you still have to make the minimum payments each month so you don’t get the full interest amount

By: KMC

KMC — Fri, 23 Feb 2007 15:36:34 +0000

My biggie is the third reason. You’re exposing yourself and doing no small bit of work for several hundred dollars per year. It just isn’t worth it for me personally.

Besides, I suspect there’s no a bottomless pit of 0% offers from new companies. I haven’t done this arb but I have to expect if you use a CitiBank card for a year, they (at least that card) aren’t going to let you do it again.