Archives for February 2007

This is a follow-up to my series on How To Make Money From 0% APR Balance Transfers, where I discuss borrowing from credit cards for over a $1,000 in profit last year. (If you’re curious about this, I highly recommend reading it first – It’s all carefully laid out, step-by-step.) Now, several people have already done this and were wondering what to do after the initial 0% period is up – Do you cancel the old card? Apply for another one right away? How do you keep the gravy train running?

First of all, do not cancel your existing cards. Why not?

Canceling won’t help your credit score, and can even hurt it. Once you’ve opened the account, closing it will not help. You could have 100 credit cards and still have a top credit score if you use them responsibly. I have over 15 cards and my scores are just fine.

The only time I ever cancel a card is when I reach the maximum amount of cards per issuer. (Added: I also cancel when faced with an annual fee that can’t be waived.) For example, Citibank allows three or four cards per person. If you want to open another one, they will make you close an existing account.

Your card has a credit line attached to it, which can hopefully be moved to another card. Let’s work from the examples I’ve already talked about in the previous steps. Let’s say you already have the Citi® Platinum Select® Visa Card®, you’ve made your money, paid it off, and the intro period is now over. Now it’s just a $10,000 line of credit just sitting there.

Now, you can close the Platinum card if they ask. It may hurt your score a bit, but the trade-off of getting a new card may be worth it.

You could also try for an automatic credit limit increase on your old line first before moving the lines over.

You could keep the card for it’s rewards perks. For example, the Discover More Card (another no fee 0% APR card) also has a rewards program where it offer 5% cash back on a specific category every quarter. Right now it has 5% back on hotels, airline tickets, and car rentals. Even though you might not have gotten this card for that reason alone, since you have it, why not use it?

Same thing with the Citi Professional Card with ThankYou Network, I got it for the bonus and 0% APR period, but I now use it for 3% back a restaurants. I even put a little sticker on it that says “Restaurants” so I remember.

You could be offered another 0% APR period later on. Sometimes if a card issuer notices inactivity on your card, they might try to lure you back with another low-rate offer.

When should you start applying for new cards? This depends on how your credit score is doing. The problem with credit scores is that they are a complex formula (hidden intentionally by FICO so you’ll buy their scores) and different people’s score react differently to the same event. But as very general rule of thumb, if you have more than your gross income level of credit card debt, it is going to be difficult to be approved for another card. For example, if you make $50k a year and have $50k of credit card debt, even if it is at 0% APR and you have it socked away safely in a savings account, it will be tough to get another card.

My suggestion? Wait until most or all of your current cards are paid off for a couple of months. Then, your low debt levels will be reflected in your credit report and your score will rebound. Then you can re-apply for more cards and start up again. If this is your first time around, you can use this period to confirm for yourself that all this stuff only hurts your credit score temporarily.

You may notice that I only have about $30,000 borrowed for profit. This is mainly on purpose, because at this level my credit score is still good enough to be approved for new cards (like this one). Others prefer to go all out, apply for a ton of cards, put off all new applications for a while, wait, and then go all out again. I have nothing against that, but I prefer my way because I am holding a steady but reasonable amount of debt with respect to income, and it doesn’t necessarily raise any big flags with card companies. To them, I’m just another consumer with some credit card debt. I like to keep this a low-stress activity. Once I start making more income, I’ll probably borrow more.

What if I run out of good cards to apply for?
You can have 3 or 4 Citi Cards and you can have 3 or 4 Discover Cards at at time. If you reach the max, just follow the example in the main post and move your limit to the new card, and close the old card. If the card is already at a low limit, just close it out and then apply. That’s 6-8 cards at a time, I’m pretty sure that’s enough for most people.

You can find several options with both no fees and 0% APR at my best no-fee balance transfer offers list, please refer back there for an updated rundown.

Finally, I know that at least Citibank let’s you have multiples of the same card. If you have a high enough limits, a 3% fee capped at $50 or $75 really isn’t that bad.

Armed with discipline and information, you should be able to consistently increase your credit limits and make money from credit card companies for many years to come. 😀

Skip To Another Part
I. Introduction and Warnings About 0% Balance Transfer Offers
II. Scouting For 0% Balance Transfer Offers
III. Application Tips and Getting Cash From 0% Balance Transfers
IV. Setup And Management of 0% APR Balance Transfers
V. Best Pre-Screened No Fee 0% APR Balance Transfer Offers