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.
By Jonathan Ping | Credit Cards | 1/26/05, 8:07pm