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11-15-2008, 01:29 PM
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#1
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Recycles dryer sheets
Join Date: May 2007
Posts: 148
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Credit Card Arbitrage
Is this worth it?
(1) I can borrow $17,500 from a credit card company (cash advance) for 6 months--the interest rate is 0.99% (fixed) + a $75.00 transaction fee. Total cost for 6 months by my calculation: $161.63.
(2) I can put the $17,500 in an online savings account and earn 3.7% (variable). Assuming the rate stays fixed, I would earn (w/o compounding): $323.75
(3) Profit: $162.12 (after paying back credit card company)
I have read about folks doing this before, and it always seemed to be more hassel than what it was worth, but never did the math to see how much I could come out ahead. I have no other credit card balances, good credit. Will this impact my credit score? I have sufficient cash flow to make the minimum monthly payments to the credit card company---which are probably minimal.
Thanks.
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11-15-2008, 01:36 PM
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#2
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Full time employment: Posting here.
Join Date: Jan 2008
Posts: 649
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Credit card companies have so many "gotcha" fees and little traps that I wouldn't bother. One inadvertent late pay or a mix-up on another bill, triggering the universal default clause, and the interest rate goes out the roof.
__________________
"There is no dignity quite so impressive, and no independence quite so important, as living within your means." Calvin Coolidge
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11-15-2008, 01:43 PM
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#3
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,022
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I've done a couple of these when I could get 0% for a year - this one isn't worth the trouble.
__________________
Numbers is hard
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11-15-2008, 01:59 PM
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#4
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Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Jun 2005
Posts: 10,252
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Don't forget that you will pay income taxes on your interest which further reduces your profit.
I wouldn't do this either. With some patience you should be able to find a 0%-rate with a no-fee, no-charge deal. Here's a deal i would do and did do: $25,000 for 1-year, 0% interest, no fees. Put it in a muni bond for 5%. Gives me $1250 after one year.
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11-15-2008, 02:53 PM
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#5
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Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Apr 2004
Location: South Texas~29N/98W Just West of Woman Hollering Creek
Posts: 6,674
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Seems like a lot of hassle with only a little bit of return AND, as mentioned, you may fall into one of the many, many landmines that CC companies have planted for you even though they advise you about it in that micro-printed piece of paper that they slide into for monthly statements.
__________________
Part-Owner of Texas
Outside of a dog, a book is man's best friend. Inside of a dog, it's too dark to read. Groucho Marx
In dire need of: faster horses, younger woman, older whiskey, more money.
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11-15-2008, 03:06 PM
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#6
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Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Dec 2006
Location: Collin County, TX
Posts: 9,296
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Your debt ratio will definitely go up. I'm not sure how often FICO updates scores however.
__________________
There's no need to complicate, our time is short..
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11-15-2008, 03:47 PM
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#7
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Thinks s/he gets paid by the post
Join Date: Jun 2006
Location: Central, Ohio, USA
Posts: 2,635
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Use that HELOC. Borrow $100,000 put it in something that gets 5.5% get $5,500 ($4,675 after taxes). HELOC interest 3% $3,000 ($2,650 after taxes). Profit $2,025. Just be ready to pay the HELOC if interest reaches, or exceeds, 5.5%.
__________________
Vietnam Veteran, CW4 USA, Retired 1979
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11-16-2008, 10:50 AM
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#8
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Thinks s/he gets paid by the post
Join Date: Jul 2007
Location: St. Louis
Posts: 1,563
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When you dance with the devil(CC company) you always lose.
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