Credit Card Arbitrage – Card Selection and Application
If you missed the first post on making money from 0% balance transfers, please see my Introduction to Credit Card Arbitrage for a little background.
Once your ready to try making money with 0% balance transfers, you need to select a card. Luckily, there’s a wonderful personal finance community out there that has done all the work for you. My Money Blog has the Best Pre Screened 0% Offers, Five Cent Nickel keeps an updated 0% balance transfer list, and Blueprint has a nice list of 0% balance transfer cards.
When you’re searching, it’s important to look at the interest rate (obviously) and the length of the 0%, but also to look at any associated fees. Almost all cards will charge you a balance transfer fee, usually around 3%, usually with a maximum amount of $250. A few cards (the cards you should be using for this process) will waive the balance transfer fee when you initially sign up. Some offers say you need to specify a balance transfer during the applicaton, and some offers will give you up to a month (or longer) to use the free balance transfer. It’s important to read the fine print! Sometimes it could be worth paying a small fee if you can borrow a large amount, but with all the offers out there, it shouldn’t be hard to find one that offers no fee. Annual fees can also cut into profits. Again, it might be worth the fee if the card has a high balance, and some cards even waive fees for the first year, but with all the options out there, this doesn’t seem worth it to me.
After perusing through the lists, a couple companies stick out. Discover and Citi seem to be at the top of every list. Since I already have a Discover Card, I decided to try a Citi Platinum Select. They have a one year 0% offer with no balance transfer fees on any initial transfers. Turns out the 0% and no fee promotion is good for any balance transfers within the first year, so I may take advantage of that in the future. More on that in a later post. Citi also allows you to request a check (made out to you) as a balance transfer. You can even request it through their website with no hassle. The Discover card, and most others, requre you to transfer the balance to another account. To actually get the cash, you would have to transfer the balance to another card with no balance, and then request a refund from that card. It’s still possible, but by requesting a check through Citi, I’ll get my money quicker.
I filled out the application online in about 10 minutes. The only gray area on the form is a field called “Annual Household Income.” I have no idea what that legally means, but my intreptation, is that they want to know the annual income of ALL people living in your household. In my case, that would be myself and my roommate. I think the credit cards intentionally leave this field ambiguous so they can stretch your credit limit as far as possible. In this case, that works out in our favor, but be careful not to get in over your head.
After I verified my information and submitted the application, they gave me an initial approval immediately. The credit limit was $6,800, which was a bit lower than I had hoped, but it would be a good start. The next step is to wait for the card in the mail to activate and begin the balance transfers. Stay tuned!
Posted on Wednesday, February 28, 2007 @ 7:24 am by BudgetFreak
Filed Under: Credit Cards
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on 28 Feb 2007 at 11:46 am 1.Melissa said …
Question – if you don’t have balance on your credit cards cuz you pay them off each month, what would you use this for? Your truck loan and stuff like that?
on 28 Feb 2007 at 12:21 pm 2.BudgetFreak said …
No, no. The point is to borrow the money and put it into a savings account and earn interest. I’ve considered paying off my truck with the money, but that’s pretty risky if I can’t come up with the money at the end of the 0% terms. I’m just going to hold onto the money. The 0% balance transfer is effectively an interest free loan from your credit card company. Check out the introduction to 0% balance transfers for more info.
on 28 Feb 2007 at 5:10 pm 3.Golbguru said …
“I think the credit cards intentionally leave this field ambiguous so they can stretch your credit limit as far as possible. ” …that is true (as far as I know), in fact discover has now started a *range* income field..like 25,000-35,000 or something…that makes it even more ambiguous.
I can’t resist a chuckle after reading your explanation to Melissa about how/why to use 0% BT offers.
It would be awesome if you can convince her.
I have tried to explain it to various people in the past..and more than half looked at me like I am a freako-scammer or something.
on 28 Feb 2007 at 8:34 pm 4.BudgetFreak said …
Haha… I know what you mean by “freako-scammer.” I tried explaining this to my parents and they looked at me like I was crazy. When I first read about credit card arbitrage, I thought for sure it was illegal. Hopefully it’ll be easier to explain once I start seeing some results.
on 01 Mar 2007 at 11:05 am 5.Melissa said …
Ok. I guess I get it. But it was much easier to understand when you told me on the phone. Anyways, keep an eye out for the smaller, local banks in SCV. Last weekend was the last weekend for an awesome deal. My aunt & cousin did it. I would have told you, but of course I didn’t find out till afterwards.
Basically the bank was offering 6% interest for 6 months up to 10,000. But, if you put in 10,000-12,500, you got 10% interest over the 6 months!
My mom got a flyer for it in the mail, first it looks like junk, because it’s stating how you go there, spin a wheel, win a prize. But it’s to get you there, then you see the other offers they have going on.