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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10:51 am (reply)
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.
11:30 am (reply)
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.
12:25 pm (reply)
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.
7:04 pm (reply)
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)
10:17 pm (reply)
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.