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Making Money On Credit Card 0% Balance Transfer Offers

Tuesday, January 4, 2011 - 7:06 AM
Back when you could easily get 5% on an internet savings account, these credit card promotions were popular. Many people took advantage of the credit card offers with 0% APR balance transfers, and used the free money to earn interest in the high yield savings accounts. The My Money Blog has a good review of how this worked. The best offers not only had 0% APRs but also no balance transfer fees.

Not only did the lower savings account rates make the deals less attractive, the credit card deals with 0% APR and no balance transfer fees became rare.

The savings account rates may still be low, but the credit card deals seem to be returning. My Money Blog has a review of a credit card promotion from Discover that offers 0% APR for 12 months on balance transfers and purchases with no balance transfer fees.
6
Ken TuminKen Tumin5,469 posts since
Nov 29, 2009
Rep Points: 125,077
1. Tuesday, January 4, 2011 - 8:17 PM
Yup, used to play this game, even after they introduced higher and higher balance transfer fee caps, but at least they were capped. But then this changed and with no caps those offers are not really attractive. Keep in mind, a quarter to a third of that extra interest you gain is taxed away as income. Thus, only reasonably capped bal. tr. fees combined with high amounts transferred (>15k) and a >3% APR make it worthwhile, also depending on the length of the promotion (preferably >6 months). These conditions have not arisen with my credit cards in a while now - we'll see whether this will change anytime soon...
2
darkdreamer4udarkdreamer4u174 posts since
Jun 11, 2010
Rep Points: 632
2. Tuesday, January 4, 2011 - 9:40 PM
I was almost glad when this game was over (with large transactions fees nowadays).  One of the pros is of course the free interest (ebven this gain is diminishing with the current low interest climate).  The cons are (1) impact on FICO with high utilization ratio, (2) the burden of indebtness, and (3) the chore of paying minimum monthly.  We also lost the freedom of moving credit lines among credit cards.  As a sample, I used to have about $100K running 0% all the time, that was 5,000 annual income at a 5% RCA rate.   

Already jugglling several RCAs at this time, I am not really looking for any more financial fun for 2011:D
3
51hh51hh1,476 posts since
Jan 16, 2010
Rep Points: 6,426
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