More on How to Make Money with 0% Credit Card Transfers (And Five Reasons Not to Try)

As I wrote in How to Make Money on 0% Credit Card Transfers, I'm not into borrowing a ton of cash on a credit card at 0%, saving it for a bit, then paying it back and pocketing the interest. I have other money making options that involve less risk and more money. That said, I know several people who read Free Money Finance are either making money with 0% credit card transfers or interested in the topic. So when I saw this piece on MoneyCentral about making money with 0% cash offers, I knew I had to highlight it.

What this piece brings to the party is a bit of the detail that is required for a successful 0% credit card investing venture. In particular, here is their take on what anyone needs to do to make money in this venture:

• A good place to put the money.

• Zero percent interest on the borrowed money, or close to it. To make much money on these offers, there needs to be a decent spread between the interest rate you're paying and the interest rate you're paid.

• Offers that let you borrow money without triggering cash advance rates.

• Offers that come with no or very low fees.

• Credit cards that you don't use for any other purpose.

Like I said, too much time, effort and even risk for me. But for some people, it's a decent way to make a few thousand extra dollars a year.

The piece ends with five times when a person should not even think of trying this method to make money. If any of these apply to you, you should definitely stay away from 0% credit card transfers:

• "I already carry some credit card debt."
• "I don't have an emergency fund."
• "I bounced a check or paid a late fee in the last year."
• "I'll soon be in the market for a major loan, like a mortgage or a car loan."
• "My credit isn't that great, and the credit limits on my cards are low."

Anyone out there making good money doing this? Anyone try it and get burned? Anyone like me and would rather focus on other efforts to make money?

Comments

[Enough Wealth]

In the psst year I've taken out four new credit cards that offered 0% on balance transfers and had no fees (either annual card fee or any transfer fee). In each case it took less than ten minutes to fill in each application and fax some ID info to the issuer. Each time I then transferred about $10K into my everyday CC account (which I pay off in full each month), and was able to withdraw the funds and deposit them into my credit union account which has a high interest savings account paying 5.1%pa. To ensure that I don't pay any interest or fees I setup a monthly automatic transfer of slightly more than the minimum to each of the CCs from my Credit Union account. There are no fees for such payments. The only thing I have to remember is to pay off the final outstanding balance just prior to the end of the 0% period.

All in all I've earned around $1,000 in extra income and it took less than 1 hour total effort. While I agree with the last five points about who should NOT attempt making money this way, I can't see that it involves to much time, effort or risk for someone in my position.

Anyhow, it seems that the card issuers are getting smarter - a recent HSBC offer I received advertised 0% on balance transfers, but had a 2.5% "settlement fee" which makes the whole thing less worthwhile. So the days of making "easy money" this way may be numbered.

[Teri]

I already replied to this topic before, but I have to say one thing key and not mentioned in the article is just in general to be on top of all your bills. I guess she hints on that with the bounced check/late fee thing. For me I just don't see what the big deal is. I am just starting out but am in the process of doing $20k BTs. I am only borrowing as much as I already have in cash anyway, and I just luckily came across a 5.7% CD at my bank for 8 months, which is just PERFECT. So I am very happy with the whole thing. I put about 1/2 the amount in the CD and will keep the rest in my competitive MM account, just hedging all bets. The best thing is I can renew my CD for 8 months at the same rate if I like. The only risk I was really coming up against before this CD was what if interest rates started to drop substantially. I am also kind of experimenting and would have loved to just use 1 card - but my hubby and I ended up doing 1 BT each. But it spreads the risk a little, not like 1 person borrowing a lot of money. We use so little credit it isn't really hurting our utilization since we already have unused high limit cards. The last time I borrowed a large sum of money for a short period of time it actually boosted my credit score big time so in the end I expect this to help our score, in the grand scheme of things. I will be closing all the cards when we are done too which we have always done and have 800 credit scores. I can't imagine having 13 open cards unused, etc. as I have seen some people do.

Easy money if you ask me. Just one of the many efforts I use to make some side money, but certainly the easiest.

[Jonathan C]

Hi FMF,

I netted $1000 last year, and will earn another $1500 or so this year with 0% balance transfer offers. But I agree, it isn't for everyone, and the "5 precautions" you offered are valid. Especially if you are looking to buy a home or take on a secured loan of any sort. But the "ding" in your credit history is only temporary (if you make your payments).

One has to be good at digesting the "Terms and Conditions" carefully (and quickly) in order to make these offers pay. I see at least 10 poor offers for every 1 decent one. With a little practice, I can now digest one in only 2-3 minutes to discern whether or not it is worth pursuing.

First I do a quick search for keywords like "free balance transfer" or "Cash advance checks". But then I've got to do due diligence, and read the fine print. There often may be a fee for ATM cash advances, but not balance transfers initiated over the telephone or cash advance checks. Then it is important to know exactly the term of the 0% offer. I try and find zero-transaction fee, 12-month terms, and set up the online account to automatically schedule the minimum monthly payment.

The actual rate or rewards of the card don't mean that much to me, because after initiating a balance transfer, you shouldn't use the card. This is because of the fine print that states that "lowest interest balances" are paid 1st, meaning all your highest interest purchase debt will continue to compound.

Jonathan

[Rich Schmidt]

I've done one BT like this, and I'm only about 3 months into it, on a Discover card. I'd like to do more, but my problem is that almost all the offers with no BT fee come from Citi, and I'd be transferring my balances to my existing Citi card in order to cash it out. They wouldn't let me do that, would they? Wouldn't they see my request, flip over to another screen, and see that I don't carry a balance on that card? And then deny my BT request?

[db]

Haven't done it, not gonna do it! I'll make money some other way.

[Hank]

I've tried this but it was too hard to see the minus balance owed every month so I ended up just paying it off early since I don't really believe in debt, even if it's at zero percent.

To me, it's better to invest our own money as you can.

[Art]

Hello Everyone,
This is my first time here. I'm here to learn and exchange ideas. I was a casualty of the Tech Bubble a few years and the sour taste of dealing with stocks and brokers still turns my stomach to this day. So I have stopped dealing with banks and brokers and have concentrated on my credit union accounts. I was lucky to have accumulated a $70k Money Mkt acct and a $96k IRA to play with. Last month I took my first 0% bank trans for $3k for a year. The thing that helps here is to reach a high enough amount to make a $3k profitable by adding it to an existing amount. My CU will be giving me 4.07% for 6 months which takes the MM to around $1,700 for 6mos. My CU gives back in the form of cash dividends at years' end, any money they have earned through the year. Last year they totaled all the interest they had paid me on both the MM and IRA, and gave 10% back for a total check of $777.35. I would advise the use of a CU in working your plays. It has really worked for me....Art

[Angie]

I generally save or pay extra to my highest rate student loan at a minimum of $1,000/mnth. I am considering applying for a 12-15k 0% balance transfer to add as an extra payment towards one of my student loans, then using the 1k/mnth as a payment of the BT debt. Which is enough to pay off the BT debt month by month over the year.

Assuming all payments are on time, approximately how long would it take for your credit score to rebound from this much. Let's assume that the balance transfer is ~2/3rd of your available credit on cards. But 100% on the card that is used. I plan on a mortgage in 2-3 years and do not want this one time deal to affect my credibility too much.

Also, I have heard I can apply for a business credit card even though I do not own a business. Is anyone aware of any restrictions or implications on this? As a business card Advanta has 0% for 15 months on balance transfers which is looking nice...