Another way to profit from credit cards

[smooch]

So the Citi Platinum Select card has 0% APR on balance transfers and purchases for 12 months. I could purchase a 50K six month CD on this card, pay it off in 6 months and pocket the interest?

 

[brewer12345]

So the Citi Platinum Select card has 0% APR on balance transfers and purchases for 12 months. I could purchase a 50K six month CD on this card, pay it off in 6 months and pocket the interest?

Sort of. You would want to do a BT, since it is unlikely that you can actually purchase a CD with a credit card. You also will have to make minimum payments until the 0% is up or you pay off the advance. That typically amounts to 2% of the balance a month.

What I have done is take BTs and invest the money in a mixture of money market funds, short term CDs, and longer term bonds. If you want to be really super safe, the way to do it would be to stuff it in a MMF.

 

[docbells]

For a good analysis on the credit card game, I enjoyed this 3 part article: http://www.mymoneyblog.com/archives/2005/01/good_credit_car_2.html

 

[cube_rat]

For a good analysis on the credit card game, I enjoyed this 3 part article:  http://www.mymoneyblog.com/archives/2005/01/good_credit_car_2.html

Is this justin's blog??

 

[justin]

Is this justin's blog??

No, but it might as well be. It looks pretty accurate.

 

[maddythebeagle]

No, but it might as well be. It looks pretty accurate.

interesting site....looks like he is tracking his net worth...cant be justin's....since it has to be a lot higher

 

[justin]

interesting site....looks like he is tracking his net worth...cant be justin's....since it has to be a lot higher

Unfortunately not much higher. I don't have the June 30 2006 financial statement completed yet for obvious reasons, but my March 31, 2006 net worth value was not a whole lot higher than this guy's. It looks like I'm getting richer at a faster rate than this guy too. I'm on track to double the net worth again this year.

 

[maggieddd]

But how can you take cash out of CC without paying interest on cash advances?

 

[brewer12345]

But how can you take cash out of CC without paying interest on cash advances?

Sometimes they will send you a check that they will treat as a balance transfer. If not, I just have them transfer the balance to my citi card (which has a zero balance). Citi then sends me a check.

 

[maggieddd]

Sometimes they will send you a check that they will treat as a balance transfer.  If not, I just have them transfer the balance to my citi card (which has a zero balance).  Citi then sends me a check.

I see, thanks

 

[maggieddd]

Just curious, how does that work out with paying taxes. Can the IRS inquire where the money came from?

 

[justin]

Just curious, how does that work out with paying taxes. Can the IRS inquire where the money came from?

Sure, tell em CC's. They get their tax money from the 1099-INT's that report the interest income from your money markets or savings accounts.

 

[maggieddd]

Sure, tell em CC's.  They get their tax money from the 1099-INT's that report the interest income from your money markets or savings accounts. 

thanks

 

[SLC Tortfeasor]

I simply do not trust credit card companies under any circumstances.  They CAN  change the rules at a whim and send you inocuous looking term change notices in 2 1/2 pt font  in the mail.  For $600 extra bucks, it's simply not worth my time nor anxious energy to manage or worry about IMHO.

I agree somewhat that the credit card companies are not to be trusted.  I'm a lawyer and even I sometimes miss or misconstrue the fine print.  But if you've got the money invested in safe and liquid investment vehicles (i.e., I would opt for money market accounts or Emigrant Direct savings accounts over CDS), then even if you somehow goof or the credit card company tries to screw you, you can simply pay off the credit card immediately. 

Sure, you have to spend some time thinking about this stuff, but if you're perusing this site you probably already obsess about money to an extent.  This is a way to obsess while earning guaranteed easy money.  I can see why millionaires wouldn't want to spend the time just to collect $600 or more a year of free money, but if you're a mere mortal like me, it's nothing to sniff at. 

 

[justin]

Sure, you have to spend some time thinking about this stuff, but if you're perusing this site you probably already obsess about money to an extent. This is a way to obsess while earning guaranteed easy money. I can see why millionaires wouldn't want to spend the time just to collect $600 or more a year of free money, but if you're a mere mortal like me, it's nothing to sniff at.

I'm getting around $4000/yr with the balances I currently have. I'm planning on putting most of this into paying down my mortgage. It'll knock it down from 22 years remaining to 12 years remaining if I keep paying an extra $4000/yr. Not bad for paying my dozen or so CC bills on time and occasionally going after new zero % CC deals.

I did have an issue with Bank of America. I mailed them the monthly payment and it was lost/stolen in the mail or by the bozos at Bank of America. I kept trying to get the 0% rate reinstated on the balance, but was never successful. They did refund the interest charges for the 6 months of the dispute, and I ended up just paying off the balance in full a few months before the regular due date.

It was a hassle, but no more so than calling up any other entity with which I transact business. My last call to Bank of America took about 18 minutes. 17.5 minutes in menu hell and waiting, then 30 seconds of explaining the situation, getting a resolution in my favor and terminating the phone call.

 

[cube_rat]

Sure, you have to spend some time thinking about this stuff, but if you're perusing this site you probably already obsess about money to an extent. This is a way to obsess while earning guaranteed easy money. I can see why millionaires wouldn't want to spend the time just to collect $600 or more a year of free money, but if you're a mere mortal like me, it's nothing to sniff at.

Great call!

I've been following this thread along with justin's own CC arbitrage thing, and I'd be lying if said I haven't been tempted. I may start out small, like 5k or 10k just to get past the nervousness.

 

[brewer12345]

Great call!   

I've been following this thread along with justin's own CC arbitrage thing, and I'd be lying if said I haven't been tempted.   I may start out small, like 5k or 10k just to get past the nervousness.

Hey, worst that can happen is that it doesn't work and you are out a couple hundred bucks. Not too likely. This stuff is pretty simple. If you have online bill-pay you may even be able to automate the payments.

 

[maddythebeagle]

Just curious, how does that work out with paying taxes.  Can the IRS inquire where the money came from?

I suppose there could be a "lifestyle audit" if you are dipping into the money and buying stuff  

 

[xmanz3]

Justin,

Tell me if I am correct, that means that you have approximately $80,000 on credit card debt if you are getting $4000/yr with a 5% interest.

I'm getting around $4000/yr with the balances I currently have.  I'm planning on putting most of this into paying down my mortgage.  It'll knock it down from 22 years remaining to 12 years remaining if I keep paying an extra $4000/yr.  Not bad for paying my dozen or so CC bills on time and occasionally going after new zero % CC deals.

I did have an issue with Bank of America.  I mailed them the monthly payment and it was lost/stolen in the mail or by the bozos at Bank of America.  I kept trying to get the 0% rate reinstated on the balance, but was never successful.  They did refund the interest charges for the 6 months of the dispute, and I ended up just paying off the balance in full a few months before the regular due date. 

It was a hassle, but no more so than calling up any other entity with which I transact business.  My last call to Bank of America took about 18 minutes.  17.5 minutes in menu hell and waiting, then 30 seconds of explaining the situation, getting a resolution in my favor and terminating the phone call.

 

[justin]

Justin,

Tell me if I am correct, that means that you have approximately $80,000 on credit card debt if you are getting $4000/yr with a 5% interest.

You are correct.

 

[xmanz3]

What credit card companies are you using and where are you putting the money into?

Also, are you getting 0% interest for 12 months on all of them? When the 12 months expired, what is your plan B?

 

[justin]

What credit card companies are you using and where are you putting the money into?

Also, are you getting 0% interest for 12 months on all of them? When the 12 months expired, what is your plan B?

Mostly citicard. CapitalOne, Bank of America, Schwab Bank (MBNA I think), and Chase also gave me free/cheap money. I put the money in Vanguard Admiral Treasury Money Market fund. Effective pre-tax yield of a bit over 5% for me.

Plan B? I guess I'm still on plan A, which is to pay off the balances as they come due and to initiate new balance transfers. My next batch of bal xfers expire in November I believe.

 

[xmanz3]

Did you just started doing this or have you been doing this for a while now? The only problem I forsee in the future is that your credit score will go down every time you apply for new CCs and that at some point you might have some problems trasfering all balances at 0% for 12 months.

 

[Nords]

Plan B?  I guess I'm still on plan A, which is to pay off the balances as they come due and to initiate new balance transfers.  My next batch of bal xfers expire in November I believe. 

The other rumor is that your home/auto insurance rates will get pounded by the drop in your credit score. Have you seen that yet, or is it an urban legend?

 

[unclemick]

Hmm

I played the game a little - only about 20k with Bank Of America currently.

And yes - my credit score went from 830 when I bought the house last year to 765 when I looked into a HELOC.

No word on insurance rates yet.

Think I'll pay it off come September and not look anymore.

And yes - I read it here.

heh heh heh