Credit Cards

Another Form of Credit Card Arbitrage

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Last updated on July 25, 2019 Comments: 3

After writing about the effect CitiBank’s new balance transfer fee has on balance transfer arbitrage, I received an email from a reader, Andy, who has an idea to take advantage of healthcare savings account (HSA) reimbursements. This is a summary of his idea.

A good way to make some extra money is to take advantage of expected reimbursements. Medical expenses are good examples. If your HSA is efficient and sends your reimbursement quickly after your claim is received, you can deposit the funds, pay the bill by credit card as late as possible, and earn interest until the bill is due later. Here’s how the time line works out:

* 1st of month. I receive a medical bill for $1,000 and immediately submit the claim to HSA.
* Likely before the 15th of month. Receive reimbursement from HSA and deposit into savings account.
* 15th of month (or first day of the next credit card statement period). Charge bill to credit card.
* 15th of following month (or several days after the end of the statement period). Receive credit card bill with $1,000 charge.
* 15th of third month (or credit card statement’s due date). Pay credit card bill using $1,000 from savings.

If you assume that you’re receiving a 1% rebate on your credit card, and your savings account earns 5% annual interest, here are Andy’s calculations, outlining two months of interest plus a rebate on the bill. None of your payments will be late.

Obviously, this is a best-case scenario and the actual return would be lower. Missing the credit card payment will negate any benefit. It’s interesting to note that if your card offers a 2% rebate, the annualized return increases to 18.25%.

What you can earn from this technique is limited by the maximum reimbursement you can receive from your HSA, but if you qualify for other employer reimbursements, you can use them to your advantage as well.

Article comments

Anonymous says:

This is really against the idea of the HSA, like others have noted.

I have a better idea: if you really want to make some extra money, go get a second part time job and quit trying to game the system. It seems like folks are expending an awful lot of energy running these little schemes for an extra $100 here and there.


Anonymous says:

That seems like a lot of trouble for less than $20. And if you make any mistake, you loose every gain. One late payment fee and that wipes out all your profits.

Besides, in any case, HSA accounts pay interest (normally). So just wait until the last minute to pay the doctor bill and accomplish the same thing. I am earning 2.96% in my HSA account and don’t have any danger of late fees or anything else.

Anonymous says:

My HSA’s have always been reimbursement plans. You need to prove that you had already paid, not that you owe.