Pragmatic Finance

I can remember back when I was younger and it was monopoly or Super Mario Bros. Now my favorite game is without a doubt the 0% Interest Balance Transfer Game. Its a fun game I like to play in order to actually make money, instead of giving it, to financial institutions such as credit card companies. If you have glanced over my networth and wondered why I have such high credit card debt this will probably be a good read.

I first learned of this game a little less than a year ago when I got a Citibank Dividend Platinum Select card for the 5% off on gas, groceries, and pharmacies. When I activated the card the csr offered to transfer a credit card balance for no fees and 0% interest for a year. When I told him that I didn’t have any credit card debt he told me he could send me a check and I could deposit the money in my bank account. I was a little shocked at this as I had never heard of this. I think I must have asked him 3 times about the 0% interest and no fees before I decided to try it out. I could tell he was a little annoyed at having to repeat and confirm the same information over and over. I am certainly glad I did try this out as it has become a decent source of income, definately worth my time.

Simply put, I borrow money from credit card companies at low or 0% interest rates and then invest the money in an online savings account in order to earn a very good interest rate and therefore free money. Its really a form of arbitrage. It is very important if you decide to attempt to play this game that you are very aware of the details and fine print of the offers. Sometimes they are sneaky about the fees. I guess it would be helpful to have a little introduction on the whole process.

Selecting Offers: The first thing to do is to find the offers you want to take advantage of. Citibank is probably my favorite. Most of their offers are for 0% interest from 6 to 12 months and they allow you to get a check to deposit at your bank. Chase and Discover also have some interesting offers available, and there are many more out there. You need to make sure that you read the terms and are well aware of when you need to pay the money back so that you do not get charged interest. I normally pay mine back before the statement of the money it is supposed to end just to be sure I won’t get charged interest. Also some companies, for example, Discover, use a two month cycle to factor in interest rates. You must be very careful here to not get charged interest.

Putting the money into your bank account: This can sometimes be the only tricky part. Citibank will send you a check to deposit if you wish and you can request it online. I have also received offers for balance transfer checks from chase that I could deposit. If you can get the company to do this its the best. Otherwise you may have to transfer a balance into a Citibank card and then request a check online. I believe they will even allow you to request a check for a negative balance.

Making money from this game: The next step is to make sure the funds are in a safe, high interest online savings account. You want to place the funds into an account with a guaranteed return. Right now you can make close to 5% interest in these. If you plan to invest the money in stocks or buy a new car or something similar then you probably shouldn’t be playing the game. Otherwise, you can make some decent, passive income. If you had $10,000 invested in an account paying over 4% interest you’d be getting over $400 for a 12 month offer. If you were able to get much higher credit limits, for example, 50k, you could get over 2k for a year. Not bad at all in my opinion.

Potential pitfalls: You are still required to pay the minimum payment every month for the card. If you are late with a payment normally they will end any promotional interest rates and give you the default rate, essentially making the money maker into a money loser if you don’t fully pay off the card. You probably will want to set up automatic payments or have reminders with an online calender or yodlee. I will discuss some of the negatives in more details in a future post, but be warned that taking advantage of these deals will lower your credit score at least temporarily. Also, there is the potential that you could invest the money in something with risk or spend it on things you wouldn’t normally buy.