Has anyone thought of this. I’ve seen enough ads on TV and thought of this while doing my forwards/ futures readings last night. Why couldn’t you simply purchase a 1% CD (I know rates are lower than that currently, but it’s an example), and then simply pay back the credit card with the principal from the CD and keep the interest? Am I missing something here?
people do this all the time. for example, a few years ago I bought a mercedes with 2% interest from the dealer, and deposited the balance of the purchase into an account that earns 3.5%.
Only thing I’m worried about is having it wreck my credit score. Any idea how much it will drop it?
MissCleo Wrote: ------------------------------------------------------- > Has anyone thought of this. I’ve seen enough ads > on TV and thought of this while doing my forwards/ > futures readings last night. Why couldn’t you > simply purchase a 1% CD (I know rates are lower > than that currently, but it’s an example), and > then simply pay back the credit card with the > principal from the CD and keep the interest? Am I > missing something here? I think, on average, the 0% APR applies to purchases made with the credit card. Cash advances, which I assume you would use to purchase the CD, are charged interest from the day it is taken out.
MissCleo Wrote: ------------------------------------------------------- > Only thing I’m worried about is having it wreck my > credit score. Any idea how much it will drop it? Why would it “wreck” your credit score? Basically if you make whatever payments you need to, you’ll be fine. The CC company is banking on you screwing up…
@Miss Cleo, Even with 0% APR cards there is still interest charged for cash advances! Which is around 20% APR. Sorry to kill your dream!
jorgeam86 Wrote: ------------------------------------------------------- > MissCleo Wrote: > -------------------------------------------------- > ----- > > Has anyone thought of this. I’ve seen enough > ads > > on TV and thought of this while doing my > forwards/ > > futures readings last night. Why couldn’t you > > simply purchase a 1% CD (I know rates are lower > > than that currently, but it’s an example), and > > then simply pay back the credit card with the > > principal from the CD and keep the interest? Am > I > > missing something here? > > I think, on average, the 0% APR applies to > purchases made with the credit card. Cash > advances, which I assume you would use to purchase > the CD, are charged interest from the day it is > taken out. I believe one of the components to the fico score is your debt capacity utilization. So if you have a cc limit of 15,000 and load up 14,000 on to the card it will ding your score.
There’s a way to do it and I penciled out one time but then didn’t follow up for some reason – this was a few years ago and I didn’t have a high enough credit card balance to make it worthwhile, I think. There are a couple of books on Amazon you can buy that show the mechanics. One of them is called something like “How to Take Advantage of People Trying to Take Advantage of You” or something lol. And Chuckrox8 is right, if you are near full utilization, your score drops.
Or you could just buy five Mercedes’ to get 0% auto loans, then reinvest the loans in certificates of deposits. Of course, you would then have five Mercedes’. But since your purpose was to get the loans, you can just trash the cars by doing donuts and ramp jumps in nearby construction yards.
Uh, didn’t you use the loan to buy the car? Where is the $$ for the CD coming from? (yes, I do realize you were being facetious, and I liked where you were going. I need a doughnut now).
0% APR balance transfer cards have a 3% flat fee on the balance transferred. You end up paying ~3% APR on credit card.
I’ve occasionally bought computer equipment with 6 month or 1 year free financing. Then taken the cash I would have paid for the product and put it in a high yield savings account. Then paid the bill just before it’s due. It works, but I’m not really sure the stress of remembering to jump through all the hoops is worth the trouble for an extra 1% on a few hundred or thousand dollars. 1% = $10 per $1000 of principal over the course of a year. Some cards have 0% interest but minimum monthly payments you have to make. One mistake, and they’ll whack you with 18-25%, sometimes retroactively. It’s definitely not arbitrage, because true arbitrage is risk-free. It’s a game of “can I pay you $10 for time to invent a silly excuse to get you to pay the penalty rate.”
lowonmemory Wrote: ------------------------------------------------------- > 0% APR balance transfer cards have a 3% flat fee > on the balance transferred. You end up paying ~3% > APR on credit card. That’s right. And then you realize that they often don’t have the promotional rate for a whole year. You pay the 3% fee, but pay the whole thing off in 6 months, because that’s the promotion… their IRR for 6 months has been 6%. Not bad, considering that they were telling you in large letters that you’ll be paying ZERO PERCENT! If you make a mistake, and get the penalty rate, then you have to pay the rate, AND if you decide to pay it off to avoid continuing with the penalty rate they get their principal back early, while keeping the transfer fee… IRR shoots through the roof! Damn’ if feels good to be a banker!
bchadwick Wrote: ------------------------------------------------------- > I’ve occasionally bought computer equipment with 6 > month or 1 year free financing. Then taken the > cash I would have paid for the product and put it > in a high yield savings account. Then paid the > bill just before it’s due. > > It works, but I’m not really sure the stress of > remembering to jump through all the hoops is worth > the trouble for an extra 1% on a few hundred or > thousand dollars. 1% = $10 per $1000 of principal > over the course of a year. > > Some cards have 0% interest but minimum monthly > payments you have to make. One mistake, and > they’ll whack you with 18-25%, sometimes > retroactively. It’s definitely not arbitrage, > because true arbitrage is risk-free. It’s a game > of "can I pay you 10 for time to invent a silly \> excuse to get you to pay the penalty rate." Yeah Bchadwick I was think more along these lines. I have loans due at 8% interest which have to be paid in cash, can't put them on credit cards. I was think of just putting everything on my cc, running it up a couple of grand and using that money I would have paid toward gas, groceries etc. in cash, towards my loans. This seems like a 100% risk free way to make the spread as long as you make the monthly 15 payments and can deliver at the end.
lowonmemory Wrote: ------------------------------------------------------- > 0% APR balance transfer cards have a 3% flat fee > on the balance transferred. You end up paying ~3% > APR on credit card. I paid 0% for six months through HSBC. There was no 3% fee.
Check out fatwallet.com There is more information on this then you could possibly want. Check out their finance forum under app-o-Rama. People made serious loot on this back in the day.
yes, cash advances are 99.9% of the time accruing interest from the get go
Im not sure why I even clicked on this, but I am surprised by the comments in here. Yes, there is an arbitrage opportunity, but it depends on a ton of factors, and the money that will be made on the arbitrage will be small. Firstly, credit cards will send you “convenience checks” these can be used to generate cash. Most offers I have seen do require some sort of fee to accept the offer, say 3%, but some have no fee. Utilizing your credit will effect your credit score, credit used/credit available should be low. This ratio effects your score. The real problem is that there is not much money to be made. Lets assume you can borrow $100,000 for free over 12 months, at very best you would be able to make $3,000. That is if you can find a place that will pay you 3% over 12 months, which I think is unlikely, it also assumes that 12 months is how long they will lend you the money a 0%.
jcole21 Wrote: ------------------------------------------------------- > Check out fatwallet.com > > There is more information on this then you could > possibly want. > > Check out their finance forum under app-o-Rama. > People made serious loot on this back in the day. Nice another FWF’er.