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by Flexo on May 19, 2005

in Credit

Many years ago, as a reader of The Motley Fool, I came across a community of people who repeatedly jump from one 0% APR credit card offer to another 0% offer. It sounds like a good way to maintain a credit card balance without paying interest, if you don’t slip up and miss a payment.

Some people have found some success in transferring money to their checking account from a credit card with one of the 0% offers. This way, they can earn interest while paying back the card each month. Personally, I haven’t decided if the effort necessary for these tricks is worth the small amount of interest gained.

I am reminded of this by Terri Cullen’s Fiscally Fit column in the Wall Street Journal today. She warns that these deals often come with steep fees and penalties. She even includes a couple tables outlining what you would expect if you transfer a balnce with a 0% APR and continue making charges to the card (often a requirement) with a 12.99% APR.

A side note: This is a free article from the Wall Street Journal. They have a somewhat new policy to “reach out to bloggers to let them know about certain articles from the print and online Journal” available to nonsubscribers.

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Flexo, the owner and creator of Consumerism Commentary, has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow him on Twitter.

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  • Good post. That WSJ article was very informative, you have to be VERY mindful of the rules and related fees when playing the 0% game. On the flip side, I've currently got several 0% balance xfers that I'm earning interest on. I'm making $77/month in interest, just for paying a couple credit card bills. At then end of a year, that amounts to a $900 addition to my "cash cushion", minus any tax expense.

    The deals I have are with Citi and Chase, and neither requires purchases at any time. They also have no fees with these particular offers. I have yet to come across an MBNA offer with no balance transfer fee, usually they charge $50 or 3%, whichever is greater, which eliminates any chance for profit. I also know someone who pays their tuition this way, bouncing from one 0%, no fee, offer to another every 9-12 months. They then save all the money they earn during the summers, hoping to be able to pay as much back as possible when they are no longer able to get 0% deals.

    The trick is finding the good offers, reading the fine print, and staying on top of the payments.
  • I would need to transfer $30,000 from a credit card (or two or three, combined) to make $75 a month at 3.0% APR (prior to taxes). That would destroy my ratio of used to available credit, and my credit score would likely drop. If I were positive I didn't need a decent credit score for a while, I would go for it.

    The plan is very workable, though, as long as the best 0% APR offers are used. If the cards require you make purchases at a higher APR every month, the purpose of the 0% APR is defeated.
  • I do have about $30,000 in 0% transfers in my Emgirant account. Since I already own a house, and I won't be refinancing (I have a 30-year fixed rate of 5.375%), I don't see it as a problem. I still have plenty of open credit on my Amex and MBNA cards for normal use.

    You could work you way up to $30,000 like I did. Start taking out BT every other month or so. You likely won't take a big hit, cc companies have been upping my credit limits like crazy since I started this, so my ratio of used/available credit hasn't declined much. It's crazy, but now I see how people that charge up huge credit card debt just keep getting more credit.
  • jim
    I just locked in a rate on the home I'm buying, I think I'm going to try to get in on the 0% BT action despite writing an article warning against it.

    If anyone is interested in reading it, it's available here. (but I don't think it'll add more if you've read Terris' article)
  • I like 0% APR deals, since I just have to pay the bills as they come in, but I'm too lazy to keep up with these balance-transfer-for-life deals where you have to make two purchases every month, etc. and have to worry about if that $1 gas purchase will count as a purchase.
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