“Good” Credit Card Debt - How-To Play the 0% APR Game, Part 1
How To Make Money From 0% APR Balance Transfers
I have credit card debt. A lot of it, actually - over $23,000 of it right now. But I’m not worried, because a) I have the cash to pay it off and b) It’s in no fee 0% APR balance transfers, so my debt is not growing. In fact, I am making money off of it because I am storing my money in an interest bearing account.
Before I go any further, I need to write this:
Do NOT do this without first reading and understanding all of the conditions of the credit card agreement and all of the potential pitfalls. I will try my best to describe them, but I may not remember them all or correctly convey their importance. Getting in debt is very easy and getting out is not. Credit cards lend you cheap money because they are counting on you to spend it.
Still interested? Basically what you are doing is arbitrage - borrowing money at a low interest rate (ideally 0%) and at the same time earning interest on that money.
Here is Part 1 of a brief How-To Guide:
1) Scouting for offers: Credit card companies often offer introductory rates of 0% or 1.9% for a certain length of time. Look for the good ones in your junk mail, be very careful in reading the fine print. First, you need to note the introductory APR and the length of the introductory period. Also be sure to note whether it applies to purchases, balance transfers, or both. A low rate on purchases are good if you can actually charge that much. It is usually easier to get cash from a balance transfer.
Personally, I only go for it if the card offers 0% on balance transfers for at least 9 months. More on why later.
2) Applying: When you apply for the card, you can very often state how much you’d like to transfer. This is the same as asking you what you’d like your credit limit to be. I say go for the moon - at least twice your current highest credit card limit (up to about $20,000). Again, if you’re going to blow it on fast cars or faster women (or men), skip it. The credit card company will give you what limit they want. I’ve asked for a $15,000 limit, and gotten a $4,000 credit limit from one bank, and a $15,000 limit from another. But if I didn’t ask for that $15,000 limit initially, I probably wouldn’t have gotten it.
Also, when they ask you for your “household” income in the application, this is a very vague question. I would include your income, your spouse’s/girlfriend’s/boyfriend’s/roommates’ incomes. You want to make it as large as possible in order to get the largest credit limit possible. Bigger is better.
3) Getting your money: To be continued in Part 2.
Find more in Credit Cards | 1/26/05, 8:07pm | Trackback
February 17th, 2005 at 10:01 am
Is there a good strategy for using credit cards and savings accounts together to make some money, even if you have NO balances on your credit cards?
Thanks
September 6th, 2005 at 11:12 pm
Umm… well if you have no balances on your cards, doesn’t that mean you’re not using them? Not sure I can help ya there.
October 6th, 2005 at 11:44 am
Scouting is the key to any application for practically any credit card so I am glad you pointed this overlooked aspect!
Thanks
BLM
October 26th, 2005 at 8:48 pm
> Is there a good strategy for using
> credit cards and savings accounts
> together to make some money, even
> if you have NO balances on your
> credit cards?
Yes. It’s called “stoozing” and it’s a very popular thing to do over in the UK.
November 2nd, 2005 at 12:18 pm
Actually what I’m talking about here is stoozing, and it does require you have a balance on your credit cards, you must borrow money cheap to earn interest off of it.
February 27th, 2006 at 3:01 pm
taking out cash advances on multiple credit cards could deal a sucker punch to your FICO score- not good if you want to buy a home!
March 4th, 2006 at 11:09 am
I had about 10-15k in credit card payments to be made. I got this opportunity to go out of the country for a job. I was out of the country for 2 years. I didn’t pay the credit cards (because i had no money with me)
What would be the status of my credit history is what I would like to know. No doubt it would be bad but would there be a charge off, how do I start repairing the history etc.
March 6th, 2006 at 3:14 pm
Here is another interesting way (reason) i have played the 0% credit card game.
In the past, i have been investing in my Roth IRA on a monthly basis. So, i would invest maxAllowed/12 every month for 12 months…
Well, after i started getting all these 0%APRs for 12 months in my mail box, i started to wonder, if i shouldn’t just … take the maxAllowed from the 0% credit cards, invest it in my IRA right away, and make the monthly payments to my credit card instead …With a little bit of stock market savvy (example, some good divindend paying stocks/mutual funds/etfs) one can make a good amount of money… taxfree…
Something to consider …
Bepanda
March 30th, 2006 at 6:56 pm
I guess you know about the Fatwallet Finance Forum, which seems to be a very good source of the current offers like this?
June 29th, 2006 at 4:16 pm
Fantastic blog! I stumbled across it about a month ago and now check it daily. Anyways, does anyone know if Bank of America accepts transfers? I have a zero balance with them and Jonathan metioned MBNA does not and I think they are affiliated. Free money is great thing, I mean what a easy way to make a couple extra bucks!
November 11th, 2006 at 2:02 am
[…] I’ve been a little lazy over the holidays, but I’m finally just about done with setting up my free money from my recent Discover Miles Card application. As mentioned in my best 0% APR offers list, it offers 0% APR for 12 months on both purchases and balance transfers, no balance transfer fee, and 5,000 (now they offer 12,000 ) free miles after the first purchase. Here is a real-life example of my post on how to do these deals. […]
February 18th, 2007 at 11:18 am
Over the last year, I have borrowed $82,000 on 0% credit card offers and parked it in a money market fund at eloan.com at a rate of 5.25%. This is a great country.
February 24th, 2007 at 9:13 pm
I have a 0%APR credit card offer for 12 months. As long as I only paid the monthly minimum, I should not have any fees right? I could then pay off my debts before the 0% APR term ends … and I could have earned interest (bank or money market) on this debt. Correct? Is there anything amiss?
Regards
July 28th, 2007 at 8:21 pm
You all should do 2 things.
#1 Google search Dave Ramsey- he teaches financial peace and the only way to get rich quick is to not get rich quick.
#2 Read the Bible- The borrower is slave to the lender.
I ain’t nobody’s slave.
Good Luck and God Bless
September 18th, 2007 at 8:49 pm
Amy,
A little naive…but innocence is good. Dave Ramsey is a great guy, but these techniques are beyond his teachings. When you borrow money from a credit card for free and lend it to a bank at 5-6%, you now become the lender! I make a few thousand each year…its quite a concept - you should look into it!
December 18th, 2007 at 12:59 pm
Great Post , I agree and thanks for the great information
December 18th, 2007 at 1:00 pm
I am 12k in debt and have been managing to save 1k into a 4.85% money market account I hope this helps me out in the long run pay off some of this 12k!
January 20th, 2008 at 5:35 pm
[…] are a few links that I’ve seen that describe the process: “Good” Credit Card Debt - How-To Play the 0% APR Game, Part 1 ? My Money Blog What A Year of 0% APR Arbitrage Has Brought Me | From PFBlog: The Unique Personal Finance Blog […]