Tips and Tools for 0% APR Balance Transfers

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How To Make Money From 0% APR Balance Transfers

do not forgetSo you’ve gotten yourself a nice credit card or two, and have already started or are thinking about playing the 0% APR balance transfer game. Now, there are two simple but very important things that you need to remember to do: pay the minimum balance every month on time, and pay off the entire balance when the 0% APR period is over on time. Here’s one tip/tool for each:

Pay the minimum each month automatically with Online Bill Pay – I love Online Bill Pay, I don’t know how I lived without it. Say I have a $20,000 balance at 0%. When you get the first statement, you’ll see the minimum payment is usually something like 2% of the balance, for example $400. As long as they don’t change this, then every single payment after that will be less than $400 as your remaining balance decreases. So, just set your Online Bill Payment to automatically pay that account $400 every month, and you’re set!

I do this and it works great. No fuss, no muss. You pay a bit more than the minimum after the first month, but the interest lost is small and it may even help your credit score to pay more. Alternatively, most credit card websites allow you to automatically suck out the minimum payment from your checking account each month. Whatever floats yer boat.

But, don’t rely on these things completely! I still look at the statement every month and make sure nothing funky happened. MBNA Bank recently raised their minimum monthly payments to a higher percentage, so don’t get caught off guard.

Set multiple automatic reminders for the 0% end date. I’ve tried several e-mail reminder services, but I’d found that Yahoo! Calendar is by far my favorite. This is partially because I use my Yahoo! personal e-mail every day as well, and I trust their reliability. There are lots of alternatives – just Google “e-mail reminders”. Or if you use Outlook or other PIM software set it up that way.

First, you must decide when you want to pay the balance off. Call your card issuer twice and double-confirm when the 0% period ends and the last day to pay off your balance before interest starts accruing. It’s usually right before the end of a statement period. Give yourself a buffer. I usually do like 2 weeks earlier. Once I’ve chosen a date, I set reminders for 1 month, 1 week, and 1 day before my deadline (I’m paranoid). I just add an event reminder to my Calendar, have it sent to both my e-mail and a text message to my cell phone. Very convenient.

Then, when the time comes, get your money out of Emigrant or whatever and set an Online Bill Payment for your deadline. That’s it, you’re done! Off to the next free money opportunity.

In the end, it’s just another bill to pay. But all of these things only take about 5 minutes to set up after you get your first credit card statement, and can save you hours of headaches later on. It also saves me from worrying “Is it due soon?” since I can just refer to the Calendar.

(Have you noticed? $25,000 at HSBC’s 4.25% for 12 months is over a 1,000 bucks interest! I hope the fun doesn’t stop.)

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  1. Thanks for the suggestion of Yahoo! Calendar. I was looking for a good reminder service since I would hate to be late once and have to scrub the entire thing. One thing that I would suggest for anyone thinking of doing this is to decide where you plan to have your money once you get it.

    I know I may have taken this 0% BT game to another level when I opened seven credit cards and used a total of $70,500 all at once. That money is now working for me at Emigrant Direct and in T-Bills. The one hurdle I am trying to avoid is having to use these funds to pay the monthly minimums but instead using my daily savings. We will see how long that lasts…

    Speaking of 0% balance transfers, I recently posted my Poll of the Week ‘How many 0% balance transfers have you done?’. Check it out.


  2. Oh man. I really do need to give this a try sometime. It’s like free money screaming to jump into my wallet. Thanks for the info!

  3. Are you suggesting to have the credit card payment come out of the online savings account or the checking account?

  4. Hey Jonathan, quick question for you. How many times have you done these BTs? Have you ever had it “go bad?” After this current round of BTs that you just started, how much total money have you borrowed (just the sum of all your BTs), and what’s the total amount of (pre-tax) free money you’d estimate you made because of it? This is just out of curiosity…

    My last day of work! Happy holidays, everyone!

  5. Ryan – Whatever you like. *I* use Presidential Bank Checking w/ Online Bill Bay. But relatively few people have that setup.

    If you initiate the payment from a credit card site, you can most likely use Emigrant or HSBC (maybe even ING) to pay for your credit card bill, as they just want a routing number and account number. That way you can just keep all the money in one interest-earning place, and take out what you need each month.

    Miller – I have never had it “go bad”, but I have been really paranoid and spent more time worrying about it going bad that I should. So I started using these tools. And they way I recommend it, you should always be able to pay off the whole balance if needed for any reason. For example, you decide to buy a house or something.

    I haven’t made any BT’s after this current round yet, and I haven’t gotten my Discover Card yet either. I’ve easily made over a thousand dollars so far from this stuff, I could have made so much more if interest rates were this high. Remember when Emigrant came out with 3% APY – that was huge news!

  6. Here’s the setup to more inane questions: I got the Citi Dividend Platinum Select card, the check is in the mail and I plan to deposit it into my HSBC account, and I’m now kicking myself because I’d really like to take advantage of the 5% cash back, but as you said, that’s a very bad idea. So now I’m thinking of getting another card and balance-transferring the entire credit limit from the Citi Dividend card, so that I can use the Citi Dividend card for purchases.

    So, questions: Can I, and should I, get another Citi card to transfer to? Will it work with 2 citi cards? And after I’ve opened up another card (my third in total) should I close my old old card, a completely irrelevant PayPal VISA? What impact would that have on my credit? And finally, I’ve heard some chatter about T-Bills… would putting part of my balance transfer money into one of those be a good idea?

  7. Amanda-

    Try this card. It is an AT&T card put out by Citi. It too has the 5% back on gas, etc, as well as 0% balance transfers (but use it only for one or the other; not both).

    If it were me, I’d just put the money in emigrant direct and look forward to the first of every month. A lot less to worry about than messing around with T-bills. The difference between the two is negligible.

  8. Jonathan, I am doing to 0% BT now. I don’t use automatic bill pay. Here is what I have done. I do BT every month. Use BT to pay all other credit cards I have. (Usually there is only one or two) So, I just sum up the total balance and pay it to my 0% card. After that, I just need to login a few days later and pay off the other cards by their balance. By doing this, I don’t really need to worry about “minimum payment”. Moreover, I don’t need to login any other cards account.

  9. what would be an ideal credit score to have before you start applying for these 0% APRs. Also, did you have a write up on being aware of some fine lines in the TOS? Some 0% offers are better than others?

  10. Another curiosity, for anyone reading here who might be able to address it: I have a Sallie Mae student loan… it’s only about $2,500 at this point, but it looks like I would still save myself a few hundred dollars by doing the ten-day payoff. Am I right about that? And if so, would it be smart to get that balance transferred to a card, and then if by the end of the 0% introductory period I didn’t have it paid off (possible), get that balance transferred to another 0% BT card? And if so, what would be the best card(s) with which to do this particular thing?

  11. Hey, first time post here.

    All of the 0% balance transfer offers I have seen require a 3% balance transfer fee in the fine print. Am I not looking at the right offers?

  12. Amanda – You could also go for the Chase card that also offers 5% back on groceries and gas. I don’t know if your 2nd Citi card would give you the same limit as your 1st one. Definitely don’t mix purchases and BTs unless both are at 0%.

    I would not close your old card as long as there is no annual fee – just don’t use it. It’ll help your credit score.

  13. About my 0% APR game. My philosophy to overcome my worries and doubts is to treat the whole thing like a business. One day I hope that lots of people would trust me to manage millions, err…. i mean billions of dollars that are NOT mine, in hopes to making them richer. I approach those tasty credit card deals as future clients/partners who give me their money to make us all money. If I cannot handle a few thousand dollars out of my comfort zone now, how can i fathom to be a billionare tycoon.

    Plus, treating this “game” like a business (with a proposal and a plan), i hope it will demonstrate to actual banks that I am worthy of a real business loan some time in the near future when I am ready.

  14. Jonathan,

    Excellent write up once again! I have been following your blog for a while and I must confess to being a lurker, but you have been doing a phenomenal job.

    I have always wondered abt the BT and never really got around to doing it exactly for the pit falls you mention, but with the step by step procedure outlined, I am definitely going to give it a shot.

    A quick question though, I wanted to see how the Credit score is affected by taking out the BTs. How do you check you Credit Scores/Reports. I mean at $60 (for both me and the wife) thats kinda expensive to do it often. I have already used by my Annual Free CR.

    Any suggestions ?

    Thanks and Keep up the good work!

  15. “Say I have a $20,000 balance at 0%. When you get the first statement, you’ll see the minimum payment is usually something like 2% of the balance, for example $400.”

    The way this reads, your saying you’ll pay appx $400 a month in minimum payments. Later in your blog, you mention Emigrant pays appx $1000 a year. Perhaps I’m reading this wrong, but I fail to see how this is beneficial (ie. $4800 in CC Min Pay vs $1000 Money Market Interest) Please clarify. This is all very intiguing. Thanks.

  16. Rahul – I space out my annual free credit reports, and also occasionally do those free trials that come with a free credit report and score. Check out the link in the middle column of this page. Just be sure to cancel as soon as you get what you need and you won’t be charged.

    Ryan – I’m not sure what you mean. You’ll have to pay back part of the money you are borrowing back to the credit card companies each month as part of the terms of you borrowing money from them. You are simply paying down the principal of the loan, not spending your own money.

    However, at the same time you are earning interest (this is your free money) from the rest of the money you borrowed in the meantime. An example of a bank you could be using is Emigrant. In the end , you pay back the loan principal, and keep the interest earned for yourself.

  17. I’m so confused! This is gonna sound like a dumb question but I’ll ask it anyways. OK, the rate is 0% but you don’t have to pay the minimum balance shown on your statement. So let’s say we do a balance transfer for $ wouldnt take make the minimum balance $500 every month?? (assuming you haven’t purchased anything else with the card). Let me know if I’ve got this all wrong.

  18. Jonathon,

    I have been doing this for 5+ years now with over $40k being carried at 0%. We treat it like a business and actually had the money stuffed into a 7.1% CD for 5 years. Our CD balance is now $59,000+ and sitting in a 5.46% CD (6 month rate).

    How we do it! We have 12 credit cards set up that each carry a $3500 original balance transfer each is due to lose the 0%. Most of the cards are good for 12 months with some at 15 months of 0% interest. We always leave at least 4-5k of open balance, since this keeps 60-70% of the balance open and the card offers keep rolling in at the rate of 10 per week.

    We pay the minimum balance on each card by automatic payments and all payments are verified to be done on time and no oops are made! Our monthly payments equal approx $900. When a card is due to flip to a new card we just transfer $3500 to the old card and request a check for the negative balance which basically covers the minimum payments of all outstanding cards.

    We take advantage of the 5% cards as much as possible and we have considered increasing the debt load since we currently make just over $3000 per year doing this system.

    Possible improvements…
    1. Deposit money into I-Series bonds paying 6.73% and all interest is non-taxable if used for school costs. Also last 3 months of interest are forfeited when you withdraw so you must leave the money in for at least 15 months to break even with the current CD rates.

    2. Somehow someway get $1,000,000 at 0% and earn 5.46% on CD’s to make $54,600 per year…minimum payments would be $20,000 per month, but could be pulled off using my above method just increase the quantity of cards.

    3. Have more banks give out free money!

  19. So if i have this right:

    Say you transferred $20,000 and put it in HSBC with 5% APR,

    you roughly come out with $21,000 (roughly 1000 intreest)

    You pay $401/month to the Credit Card and then pay off the “debt” after 11 months which is roughly:

    Monthly payment($4,411) and before the 12 months hit, you pay back the rest which is 20,000-4,411=15589.You’ll have $5411 left in HSBC? assuming you are using your checking account to pay the $4,411. You grand profit will be around $1k??

  20. Fobulous,

    You are correct in your assumptions except each month your minimum payment will drop slightly and you will have about $935 profit…11 months @ 5%.

    The $400 payment is the bug in the ointment for some to come up with. For some a restructuring of their W-4 will provide the $400 needed to pay the monthly payment.

    That was the reason I could not do more than $40,000 in my setup. Now I could do payments of $2500/month, but not really sure I want to strap my budget so tight.

  21. I have been doing this off and on for over a decade, but only when I’ve needed money, I never had a vehicle for making a profit on the deal, until now, since I just recently discovered 5% savings accounts. One thing that always has amazed me is that just as a 0.0 is about to expire, that is when I seem to get more offers, just barely enough to keep it going. One particular offer I’ve got for $35K, 0.0% on purchases only raises an interesting question. Can I purchase something with the card that is easily convertible to cash (money order, or whatever) and still count as a purchase for purposes of the card use? I can’t find anything in the terms & conditions that would disallow that.

  22. Donovan says

    Living outside the USA for the past twelve years while maintaining US checking accounts and lines of credit allowed us literally to purchase and pay for our home
    at LESS THAN 0% interest with the help of constant 0%
    offers from credit card companies after a major economic
    crisis in this country with a serious currency devaluation;
    with a negotiated fixed interest rate on our mortgage we
    were able to pay for our home in two years as our dollar
    payments (using 0% interest loans) decreased every month
    as the peso devalued. Never had a single problem with
    advertising deception because I read the fine print and
    as others who have written, only take offers with no anual
    fee and at least 9 months at zero. What a helping hand!

  23. Question: Looking to purchase an engagement ring. Have great credit but cash is tied up in several avenues that i don’t feel like freeing up right now,but found a great value on a ring.

    I was looking for an 18 month 0% APR to put about $8k-$9k on it and free up cash/earn interest during that time – pay off 18 months from now.

    Can i get a 12months 0% APR – put the ring on it and transfer it to another card 12 months from now?

    Also – can i purchase it on my current credit card and transfer a certain % of the balance to another? Figured you might have answers before diving in deep in legal parts of credit card.

  24. Jonathan,
    After the markets crashed in 2001-02, I borrowed $45,000 on several credit cards and invested the money aggressively in no-load international stock mutual funds (Western Europe, Japan, Asia, India, Latin America, Eastern Europe) through Vanguard, T Rowe Price, Fidelity, Matthews, and others. Over the past 5 years, I have averaged a 26% annual return. The credit card debt has cost me about 2% per year, for a net annual return of 24%. So total profits are $132,000.
    I wouldn’t recommend this strategy today because international markets (particularly emerging markets) have had such a great run. In fact, I’m shifting a lot into bond funds now as a defensive measure.
    Also, at the time I borrowed the $45,000, my net worth was about $250,000, so I was risking only 18% of my net worth. Also, I was 39 years old, so I could afford to make up losses if the investments faltered.
    I would recommend this strategy to others if the markets crash again in the future and if the investor (a) can afford to lose money in the short term, (b) has a high tolerance for risk, (c) will buy and not sell if the markets continue dropping, (c) is savvy about principles of investing, including asset allocation.

  25. I’m currently playing this credit card arbitrage game with about 60,000 debt. The big downside is the hit to your credit score which can have effects you might not anticipate. I did not need home or auto loans in the near future, so felt it harmless to try this. But your credit score is also tracked by others, like your homeowners and auto insurers. My auto insurance rate mysteriously went up $300 after being stable or declining for years. Your credit score can effect these rates I later found out, even though the insurers would not openly admit to this practice. To protect your credit score you should keep the debt on your cards below 50% of your credit line, even better is to keep it below 35%. Applying to multiple card offers within a short period of time will also impact your credit score. I found the credit lines I was offered once my debt was near my income quickly went down to a point where arbitrage is not worth the effort. And then the offers dry up completely when your credit score is iimpacted. They probably won’t come back until I pay off the debt and my credit score rebounds. I still figure I’m coming out ahead, but taking on this much debt looks bad to anyone who has a financial relationship with you. Just a caveat.

  26. I am considering using a 0% card for supplemental financing of two businesses I own. I only need about 15K and should be able to pay it off within the 12 month timeframe. Is this too risky and if I can’t pay it off, can I roll the balance into another 0% card?

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