Penny wise, pound foolish

[no_such_reality]

On another discussion forum, there is topic about using the “free” money from credit cards to invest safely in CDs, high-yield savings at internet banks to make a free 5 or 6% or so.

Some are actually touting about all the “free” money they’re making by having $25,000, $65,000 to over $100,000 on 0% credit cards that they have in a CD or savings acount. My favorite is the guy carrying over $100K in balances, making over a $100K, claiming he’s making over $3000/yr juggling it.

Is anybody here doing it? Not just taking advantage of the fluke 0% $0 charge cash advance, but actively rolling it over. Most importantly, have you actually tracked all the expenses of doing it, and have a solid estimate of your time spent on it.

My thought on it is that in most cases really aren’t making any money it. By the time they factor in their marginal taxes, any transfer fees, the mulitple credit card monthly minimum payments, the opening and closing of accounts, and the multiple balance transfers, let alone any accidental interest expenses from accidentally carrying a balance a month too long, they’re breaking even or making less than 1%, or even less the 0.5% take home for carrying balances that exceed their yearly gross income.

[Daniel]

I’m actually doing it. The biggest expense (one you haven’t mentioned) is the hit to the FICO score. Carrying high balances will certainly ding it. If your score is high enough that you don’t care (800 or 770 gets you the same mortgage) and/or you’re not planning to apply for a mortgage anytime soon, then that doesn’t matter. The rest (time, expenditures) is very, very low, close to zero I’d say. You can open an account online in 5 minutes and set it up for automatic payment. Of course, you have to watch the fine print carefully before you apply, because there are all sorts of tricks, like 0% is only valid on transfers, not on purchases, and the other way around.

The best deals I’ve seen are from Capital One; they will basically cut you a $30K check, and charge no interest for about 15 months.

[Daniel]

One more thing: if you carry a dozen of them, yes, I can see how you may have a problem keeping track of everything. But if you focus on just one or two cards with very high limits, then it’s easy. I only have two, and I don’t actually use them (just got the cash, set up automatic minimum payments, and tossed them in a drawer, activation stickers still on them). Also, I don’t know about “rolling over”, as I haven’t been doing this long enough. But, if these offers will still be around a year from now, I might think about that. If not, I’ll just pay the balances back and close the accounts.

Finally, it goes without saying that balance transfer fees are a no-no (why pay a 3% fee now to get a measly 5% in a year?). But most cards don’t charge that for their “special offers”.

[no_such_reality]

By rolling over, I mean what you’re thinking about doing at the end of year. If another card is available, flip it to that so you can use it again for another year “free”.

So far, you aren’t doing what the others are doing. You’re doing just the initial arbitrage. How you turn out will depend on how good you are at managing your 0% end date.

You’re grabbing a free $1200-$1300 on pretty much a one shot deal. Basically if nothing is available in the last month, you’ll hopefully close out before it kicks to regular credit card interest with $23K on it. So, yeah, seems like an easy $1000 or so. but…

As you said, lots of tricks, and I suspect when people juggle multiple cards, use auto-pay, to carry and transfer between several cards to keep it going year to year. I suspect the oopsie, looks like 0% expired last month, or the ah, I missed the xfer fee to catch up…

In your case, if you walk away, after Fed and Cali taxes, you’ll probably bring home an extra $70/month or so.

hey, $70 is $70. I can understand. I’m talking more about the person has $25K spread on three cards to do it. Six balance xfers a year to keep rolling forward, 36 monthly minimum payments, to do what? Make $100/month before taxes?

[Author]

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